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Independent financial advisers founded in 1975
Over £1.4 billion client funds under management
17 industry awards for advice since 1989

By Mike Williams, Genesis Managing Partner

Founder and Managing Partner of Genesis Asset Management, New York

Letter from America

The True Colour of Wealth

By Mike Williams | Friday, 09 November, 2018

This chart has passed around many circles.

But after the month of October it’s well worth a revisit.

Let it serve as a mental reset:

Focus for a moment on all that ‘blue’ colour above.

Then look at the ‘orange’ in the chart as the seed garden from which the blue grows.

If you take a long-term perspective to investing and building toward wealth management then praying for periods of orange would be a good thing, right?

So what’s the orange?

That colour represents every bear market since the Great Depression.

And all that blue?

Those are the bull markets since 1929.

Now think about this: The orange bits make up less than 7% of that entire time.

Why Worry?

The entire planet seems to be fretting over elections.

As much as politicians would like to feel they have some vital impact over the long-haul - it is an extremely rare one who does.

And the markets?

Well, they act on emotion in the short-term, just as has been witnessed over the last 30 days or so.

Fear has surged, as has worry, and stocks are down from their highs.

And more pressure has been put on stocks internally than we have seen in many years.

All of this is happening while records are being set faster than they can be reported by the amply juiced press corp.

It's laughable - and sad - all at the same time.

The Dirty Little Secret?

Make sure to do your best to ignore the chatter, politics, opinions and emotions.

Reflect instead on the facts.

You don’t need to waste much time worrying about which party will win.

Since 1946, there have been 18 U.S. midterm elections. Stocks were higher 12 months after every single one of them.

Every single one!

That’s 18 for 18.

Out of 72 years, during which America has had every possible political combination: Republican president with Democratic Congress; Democratic president with Republican Congress; Republican president and Congress; Democratic president and Congress…

The outcome after all that podium bashing and political gnashing of teeth is that since 1946, stocks have risen an average of 17% in the year after a midterm.

And if you measure from the yearly midterm lows, the results are even better; from their lows, stocks jumped an average of 32% over the next 12 months.

For perspective, that’s more than double the average performance for stocks in all years.

Finally, we’re also entering the third year of a presidential term, which is historically the strongest year for stocks.

Don’t waste your time on party political colours. Keep your eyes on the colours important to your own wealth garden.

©2023 Alan Steel Asset Management Limited is authorised & regulated by The Financial Conduct Authority. Please note that the Financial Conduct Authority does not regulate some forms of tax advice. Company Registration: SC58014

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