Hello Everyone! Today, I will share with you a brief overview of the markets last month, and will provide some insights as to what the presidential election in November could mean for the markets.
I know you are anxious for me to get to the election topic, but first let's talk about August's market performance. The S&P500 index finished down 0.1% for the month, ending the 5-month winning streak. August was unique in that volatility in the S&P500 was exceptionally low. In fact, there was not 1 trading day the entire month that the Index moved up or down more than 1%. Despite the slightly negative returns in August, the S&P500 was still up 7.8% YTD as of the end of August.
August was a good month for international investing as both foreign developed and emerging markets stocks outperformed US stocks based on the MSCI EAFE and MSCI EM indexes. Not only were European markets only minimally disrupted by Brexit, but in dollar terms they have actually outperformed the US since the vote. Let me repeat that. Post Brexit, European markets have outperformed the S&P 500. Pretty incredible!
Now, on to the election topic! Without having to go down a political rabbit hole, what I will say is that experience has taught us it's probably best to keep our voting and investment decisions separate, because at the end of the day, the stock market can perform well regardless of who sits in the White House.
So historically, which party has been better for market returns? A common belief is that the Republican Party tends to be more pro-business, and therefore they should produce better returns for investors, but as you can see in the chart below, that Oppenheimer Funds recently put out the markets have done well, and had bouts of difficulty during presidential terms of both parties.
If you look at the Dow Jones Industrial Average since its invention in 1897, it's clear the stock market historically has not favored either party.
A few additional points the Oppenheimer piece mentions are : 1. That campaign rhetoric doesn’t always influence what happens during a president's tenure. In other words, what presidential candidates promise to implement as part of their platform doesn't always end up coming true and secondly consumers and businesses have a far greater impact on the economy than the government.
In conclusion, despite the fact that we have two of the least popular presidential candidates in the history of our country (or at least since we have been tracking that), that doesn’t mean we should abandon our investment and financial plans. We should instead focus our attention to the market and economic fundamentals, which still support the late cycle of an economic expansion. I know it's hard, but we have to learn how to control our emotions - especially when it comes to politics and investing.
Thank you for taking the time to read this, and as always, if you have any questions, please feel free to give me a call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.
Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.
Investing involves risk including loss of principal.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada.