Economic Growth – Fear And Loathing In Election Season by Ben Strubel, Strubel Investment Management
Clinton has the second highest unfavorable rating of any presidential candidate in history. Who has the highest unfavorable rating ever? Donald Trump. Both candidates are reviled by the other party and even by some in their own party. Come November at least half of the country is going to be bitterly disappointed and very scared. In fact, I’ve already had some clients express their fear of what would happen if “the other” candidate won.
Was Ben Graham's big purchase of GEICO shares actually a value investment? Perhaps it was contrary to what many believe. "In 1948, we made our GEICO investment and from then on, we seemed to be very brilliant people." -- Benjamin Graham, 1976 Both Benjamin Graham and Warren Buffett can attribute a large part of their Read More
While I certainly have my own personal political views, I can’t afford to let that cloud my judgment or bias my thinking when it comes to managing my clients’ money. Given how hated both the presidential, you may be surprised to hear this, but I’m not really concerned who wins—from the perspective of the manager of my clients’ money.
In the US, one person just isn’t going to have a huge effect on the stock market and the global economy, even if that person is the epitome of evil in your book. We have 538 members of Congress, 50 governors, and approximately 7,382 state-level legislators. Now add to that all the mayors and town and county-level government officials. Now add in all the support staff and advisors they have. Plus don’t forget about the over 11,000 registered lobbyists in DC. There are thousands upon thousands of elected officials and professional bribers (usually referred to as lobbyists) that all influence government policy. How many of those people are going to be re-elected? Is the ACCCE (coal lobby) or the Sierra Club going to pack up shop because the “other” candidate won? How much will things really change? If you want wholesale change, then you need not only change at every level of government but changes to lobbying laws as well.
Take a look at some of the charts and graphs below. The first shows the real median household income in the US since the mid-1980s. It’s basically been stagnant (especially if you adjust for more two earner households).
Next, we have a graph of the average annual GDP growth during each post-WWII economic expansion.
We can clearly see a trend in economic growth during recoveries becoming weaker and weaker during each expansion.
Below is a graph of the stock market (the S&P 500) since the 1950s.
In all these charts, there is no clear pattern of correlates with either the Democrats or the Republicans being in charge. Take the Obama years. The market has done well, the economy grew, wages are still stagnant, and income inequality grew. Who takes the blame? The president is a Democrat, yet the House and Senate both have Republican majorities. But wait, there were Democratic majorities at the beginning of Obama’s first term. A majority of state legislatures and governorships were held by Republicans. Call me crazy, but I think that’s pretty good evidence that the economic record of the last eight years belongs to BOTH political parties. Indeed, during the past few decades when the average American hasn’t done very well economically and the stock market has risen, we’ve had Democrats in state legislatures, governorships, Congress, and the White House. We’ve also had Republicans in state legislatures, governorships, Congress, and the White House. The trends that have been in place over the past few decades show it doesn’t matter which party is in power. Wholesale change in the economy requires wholesale changes in both parties, not just a new President.
Both candidates, from an economic perspective, aren’t really going to change much. Hillary Clinton is a mainstream Democratic politician. There won’t be any landslide changes under her. Take a look at her economic proposals: There’s a tweak here, a nip and a tuck there, but nothing big. Donald Trump is certainly not a mainstream candidate and because of that there would ordinarily be a chance of dramatic change. Mr. Trump, however, has not really built out his campaign and policy staff. Instead, he has largely relied on the RNC to fill it. It’s likely, unless something changes, that a Trump administration would be filled with traditional Republican-party operatives in the same way a Clinton administration would be filled with traditional Democratic operatives.
Whether you want to “Make America Great Again” or “You’re With Her” or your desperately hoping this is some sort of nightmare and we’ll all wake up to two better choices to vote for I don’t think you’ll need to worry about your investment portfolio come November. No matter what happens with the election, at least 50% of you will be disappointed. But your disappointment won’t be due to your investments.
No Company Profiled
No Company Profiled This Month.
About Our Portfolios
The Capital Appreciation Fund and the Dividend Fund are innovative, investor friendly alternative to traditional actively managed mutual funds called a Spoke Fund ®. We can also customize portfolios for clients seeking less risk and volatility by including allocations to other asset classes such as bonds and real estate.
Spoke Funds are significantly less expensive and more transparent than a large majority of mutual funds. Both portfolios are managed for the long term using value investing principles. Fees for both portfolios are 1.25% of assets annually. That figure includes both our management fee and all trading costs. We try to minimize turnover and taxes as well in both funds.
Investor accounts are held in your name (we never take investor money) at FOLIOfn or Interactive Brokers*.
For more information visit our website.
*Some older accounts may be custodied at TradePMR.
Historical results are not indicative of future performance. Positive returns are not guaranteed. Individual results will vary depending on market conditions and investing may cause capital loss.
The performance data presented prior to 2011:
- Represents a composite of all discretionary equity investments in accounts that have been open for at least one year. Any accounts open for less than one year are excluded from the composite performance shown. From time to time clients have made special requests that SIM hold securities in their account that are not included in SIMs recommended equity portfolio, those investments are excluded from the composite results shown.
- Performance is calculated using a holding period return formula.
- Reflect the deduction of a management fee of 1% of assets per year.
- Reflect the reinvestment of capital gains and dividends.
Performance data presented for 2011 and after:
- Represents the performance of the model portfolio that client accounts are linked too.
- Reflect the deduction of management fees of 1% of assets per year.
- Reflect the reinvestment of capital gains and dividends.
The S&P 500, used for comparison purposes may have a significantly different volatility than the portfolios used for the presentation of SIM’s composite returns.
The publication of this performance data is in no way a solicitation or offer to sell securities or investment advisory services.