For Whom the Bell Tolled
I remember how a consensus of eminent and celebrity economists peddled their expectations pre-election in 2016 about how a Donald Trump victory would mean years of recession and stock market underperformance.
That included Nobel Memorial Prize-winning American economist Paul Krugman, who told the New York Times in November 2016, “So we are very probably looking at a global recession, with no end in sight.”*
But like a “No Bell” prize for a church without a steeple, something didn’t quite ring true.
As the polls came in, and “The Combover” took over four years ago, the S&P 500 proceeded to immediately drop just over 5%...before rallying and ending 1% up the day after the election.
Of course, herds of investors did what herds of investors always do when their collective Amygdalas are stroked by the financial media gloomsters during every imagined Tulipmania from time immemorial. They panicked and fled just in time to lose a lot of money.
Equities were abandoned in their £$multi-billions, and cash deposit accounts and bond funds were bought up like loo roll before a Covid lockdown. The impatient wiped off and the patient wiped on, so to speak.
Fast forward to Trump vs Biden and we see a similar level of speculation followed by an even more remarkable “electoral collage” and market result.
Almost half of the financial strategists surveyed by CNBC in August of this year expected the S&P 500 to decline in the first month following election day by up to 5%.
But this time there was no 5% dip.
In fact, at the time of writing the mainstream US and UK Indexes have all climbed - the former to all-time highs across the Dow Jones, S&P 500, and Nasdaq, while the latter is up 300 points since Biden trumped Trump.
And the four years in-between?
Well, since 2016, the S&P 500 has almost doubled, the Dow Jones has gone up from about 16,000 to just over 29,000 points, and the tech-heavy Nasdaq has gone up from about 5,000 to just over 11,700 points. Even the much-maligned FTSE 100 is up about 300 points during that time.
So much for “expert” predictions.
Folks, history tells us the markets overall have been positive in 19 of the last 23 election years dating from 1928 to 2016.
And with that understanding in mind, believing in this continuing compendium of grim media fairy tales is a bit like poking yourself with a broken finger and blaming everywhere you touch for the ensuing pain.
It’s the noise that’s causing you the pain, not the markets.
And if you liked what you read, and would like to have a chat about it, give us a call.
* New York Times, 9th November 2016, “What Happened on Election Day”