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by Michael Rogan
Special to Tropical Breeze
So we are nearing another presidential
election as we experience economic uncertainty and continued
frustration with stock market performance. This year both
presidential parties promise to have the solution to all that ails
us, as usual. One has offered up a veteran Washington insider
teamed up with a relatively politically unknown running mate while
the other party has selected a relatively politically unknown
candidate teamed up with a veteran Washington insider as a running
mate. While this will truly be an election of firsts, without
sounding politically biased, I can't help but think the eventual
result will be continued political status quo, regardless of who we
elect.
Every four years, clients and friends ask
me the same questions about which candidate will be better for
investors. They are usually sure that one candidate will be better
than the other for the stock market, while if the other is elected
it will mean certain economic disaster. So, in order to give you
some guidance, I thought I'd share with you what research shows
about which party is better than the other for investors and the
market.
In short -- it doesn't matter. Diehard
Republicans are always sure their party has the best economic ideas
while Democrats tend to feel their party is the most economically
fair. It often gets reported that the stock market has actually
performed better under a Democratic president. Chronologically,
that's true, sort of.
Those studies usually measure market
performance from the year of inauguration to the end of the term.
That seems to be the only reasonable way to track the performance
unless you consider 1) the President doesn't create the
legislation, the Congress does; 2) while the President proposes a
budget, his proposals don't get put to a vote until well into his
first year; 3) even if the President's proposals are largely
adopted by Congress, it takes six to nine months for any
significant changes in taxation or economic policy to cycle through
our enormous economy in a measurable way.
It never gets reported this way but the
most important thing to remember is that our nation's economy, and
ultimately the performance of the stock market, are determined by
the actions of all of us, the 300 million Americans who decide each
day what goods and services we'd like to purchase. Our economy is
greatly influenced by the 140 million of us who get up each day and
go to work, performing whatever tasks we perform to earn our pay.
And increasingly, our economy is shaped by the actions of billions
of people who live in other countries, producing and consuming our
goods and services.
So while it may be in vogue to
prognosticate on the economy and market based on the presidential
election, it is no more meaningful an indicator than which team
wins the Super Bowl or what your horoscope says. And, perhaps more
importantly, trying to predict short term stock market performance
is not important in any way to accumulating long term wealth.
Indeed, it could be argued that predicting short term stock market
performance is likely to be detrimental to your long term wealth
building.
If you are not yet retired, you should be
continuing to invest pursuant to your long term financial plan
regardless of who's president. If you're retired, your
investments should be appropriately allocated to predictably allow
you to meet your income needs as defined by your long term
financial plan. In neither case should a presidential election
change your plan. Now if you don't have a long term plan for
building and maintaining wealth, perhaps that's why you're trying
to forecast the impact of the election in the first place.
Michael Rogan is president of Rogan &
Associates Financial Planners, a locally-owned financial planning
brokerage firm based in Safety Harbor. He brings nearly two decades
of financial expertise to the local airwaves on the radio show,
Financial Planning for Life, heard at 11 a.m. weekdays on AM 1250
WHNZ. For more information, call 727-712-3400 or visit
www.RoganFinancial.com.
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