In case you missed it, one of the most powerful economic nations in the world is having an election. Stack that on top of an existing global health crisis, mounting racial tensions, environmental concerns, and you have a potent mix of fear and uncertainty.
For our American friends, what does your vote mean for the long term future of the economy? And for those of us who aren’t casting a vote in the 2020 US Presidential election, what does the outcome mean?
Certainly looking at the stock market the past week has shown one thing for certain: people don’t know what to expect. And that fear and uncertainty shows in stock prices spiking and plummeting all within the space of a few hours.
What Happens if the “Other Guy” Wins?
No matter which political side you’re on, there is always “the other guy (or gal)”. And the blessing of democracy enables us to choose our leaders - which also means that the one you’ve pushed your chips in on might not always come out on top.
And when that happens, and the other guy wins, what happens then?
The answer might not be that Hail Mary you were hoping for.
The truth is, no matter who wins, the president of the United States, arguably one of the most powerful people in the world, has very little long-term influence on the stock market.
What CAN the President do?
In times of crisis, the president exercises some very moderate influence in the form of economic relief packages. We saw this in 2008 with the big bank bailout. And we’re seeing the same thing now with COVID relief being dispensed to businesses and individuals alike. That extra cash is propping up the economy, but not in as substantial a way as many people would like to think.
Outside of some short term relief, there really isn’t that much that the president can affect. Which means all the chest beating about how “great” someone is for the economy as a whole is just a marketing gimmick.
Who Does Control the Economy?
If it isn’t the president, who is it that controls a nation’s economy?
The short answer is nobody, and everybody.
The economy is a complex system, made up of the economic productivity of all the parts. While some parts, like small businesses, may be suffering, other parts, like big tech, are thriving. One person in specific doesn’t actually exert that much influence, but rather the economy is the sum of the whole.
What Can You Do to Prosper Financially In These Times?
Your vote doesn’t directly mean your finances will take care of themselves. That doesn’t mean your vote doesn’t matter - so for our American neighbors, go and vote. Your nation is more than just the stock market.
But for everyone, don’t rely on the government, any government, for your financial well-being. Financial freedom is a worthy pursuit, but a journey where you are in the drivers’ seat.
What to do, you ask?
Keep sticking to your financial plan. Ignore the noise. For the long-range focused, invest in a diversified portfolio, and keep investing through all the ups and downs. The dollar cost averaging will take care of your returns, buying more when prices are down, and less when they are up. The diversified aspect takes care of your risk.
For those with a more immediate investment focus? No fee savings accounts and government bonds. Those investments, while providing near 0% returns, are as safe as you can get.
Do not try to gamble with who will win an election, and speculate about what that will mean for the economy and stock markets. That’s gambling, pure and simple.
Success is yours, if you only make a well-thought out plan, and stick to it. Don’t get side-tracked by the clowns on the sidelines. This is your financial future, go after it with all the zeal that a commitment of that magnitude requires.