Maintaining perspective can be challenging but in a time of crisis, it is even harder because emotions run high. Every election seems to be painted as a crisis. We are pummeled with conflicting messages daily and as we approach election day; the messages turn more dire. People want to know what is going on and be well-informed but if not careful, they can get worked up as they consume information.
The challenge for advisors is counselling clients who have completely bought into their candidate’s pitch and fear their ticket is likely to lose. Past performance of the economy and markets and the other elements of the backdrop of the election don’t matter much to these clients.
It doesn’t matter that all politicians give the pitch. It doesn’t matter that markets don’t behave differently around elections than during other times. It doesn’t matter that America has survived all prior presidents and crises. Why? Because, wait for it…”this time is different.”
This idea is really tough to respond to because this time really is different, sort of. These players and plot lines are unique. There is truth in some of the allegations levied against the candidates. Clients will believe what they want to believe. Confirmation bias is alive and well and on glaring display right now. Clients standing on the ledge don’t see their bias at all.
In past elections, with clients who have fully bought what their preferred candidate is selling and believed doom was imminent because their guy was going to lose, frankly, I have had little success in calming them down. They just keep going back to “yeah but this is different” and I cannot prove or promise a client there won’t be a massive recession or nasty bear market.
We started warning clients of a 2020 media circus in the summer of last year. We pointed out that our clients’ feelings about the candidates are not particularly good guides to making decisions about their portfolio. Neither are our feelings as advisors. The market doesn’t care what we think individually.
We haven’t been able to bring calm, but we have had some success getting clients to stick to their plans. We remind clients that their investment lifetime far exceeds the term of any elected official. We also remind them that they chose to approach markets with a long-term perspective in large part because they didn’t want to be in the business of trying to time the markets. That is one reason they hired us.
We ask them how they feel after watching cable news. The answer is almost always gravely concerned for the country and the future their kids and grandkids will inherit. We’ve had more than a few tell us their moods have improved by turning off the TV. But some are so worried, they just can’t do it.
It helps that they have all been wrong about what they thought markets would do in the past. They can see being wrong about the market’s behavior can be costly.
The president is often called the most powerful man in the world, but presidents don’t run the markets. Investors don’t invest in political parties, they invest in businesses. Businesses adapt to changes and work to serve their customers and create value for their shareholders. That’s why markets tend to rise over time despite obstacles politicians may put in place. This undeniable evidence of success for well-diversified, well-balanced, disciplined, patient investors makes taking a long-term view a prudent approach.
Thinking through the whys about how to approach markets helps clients remember that being a successful long-term investor is hard but being a short-term trader is harder. Good luck and please vote.
Dan Moisand, CFP, has been featured as one of America’s top independent financial planners by Financial Planning, Financial Advisor, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager, and Worth magazines. He practices in Melbourne, Fla. You can reach him at [email protected].