If-Then Investment Planning Prior to an ElectionSheaff Briefs Editor
In classical logic, a connection is made between two statements, implying that if P (the proposition) is true, then Q (the next statement) is also true.
- If Sarah works overtime, she’ll be paid time-and-a-half.
- If I study, then I’ll get good grades.
- If I get good grades, then I’ll get into a good college.
You get the idea—If statement #1, a given fact, is true, then statement #2 is a new fact that may be deduced from statement #1. Just as in many prior U.S. elections seasons, investors tend to engage in pre-election investment planning based on precisely that form of “if–then” thinking.
Addressing the No. 1 question currently on investors’ minds (What if the incumbent party loses the presidency???), Sheaff Brock Managing Director and Chief Investment Officer David Gilreath reviews market trends (as indicated by S&P 500 returns) in election years going all the way back to the 1930s….
While, as Gilreath is careful to remind investors, past performance is no guarantee of future results, pre-election investment planners should find this chart encouraging, as it traces positive investment results for the past half-century under all three scenarios (unified government, unified congress, split congress).
This time around, should a democratic sweep scare the markets? Probably not, is the conclusion of LPL Research, looking back at periods of time since 1951 when Democrats controlled both the White House and Congress.
If Strategas Research Partners are right again this time around, by Halloween night 2020, pre-election investment planners should have their if–then answer (Strategas predicted the 2016 election results at a time when Trump was way down in the polls). Their “secret”? Tracking S&P stock performance during the months of August, September, and October preceding an election. Historically (between 1936 and 2016), stocks have sold off ahead of an opposition party win, but have risen in price before an incumbent party outcome.
In classical logic, if statement #1, a given fact, is true, a new reality may be deduced. Will if–then pre-election investment planning follow that model? Wryly quoting Mark Twain’s “History doesn’t always repeat itself, but it often rhymes,” Sheaff Brock’s Dave Gilreath advises a wait-and-see attitude.