Thoughts on the Market during Election Time
In the midst of election noise, many investors may overreact and make poor investment decisions. We recognize the deep emotions people feel when it comes to politics, and we don't want to minimize the importance of the election. However, we want to avoid making emotional decisions when it comes to investing. We must realize the importance of remaining invested for our long-term goals. Here are a few thoughts to consider during this time:
- People always tend to think "it's different this time around"
- We hear this phrase so often. If we follow sound investment principles, we don't need to worry.
- Principles are timeless and stable; no short-term event is going to change them.
- Things move slowly in Washington
- A recent article by Kevin Cooper of AMG Funds shares a timely message: "The president can influence fiscal policy. However, executive branch decisions and the impacts of those decisions, in fiscal policy, taxes, or economic reforms, take months if not years to play out, and few can understand the full ramifications during the election cycle."
- On Day 1 of a new presidential term, there aren't going to be dramatic changes. Change takes time.
- We are investing in companies, not policies or candidates
- In the days and weeks after the election, will companies stop operating? Will Chipotle stop delivering burritos? Will everyone stop using Microsoft Word? Will Chevron gas stations close? We need to remember that the earnings of the companies we invest in are more important to stock performance than the party of the president. In addition, companies will always innovate and adjust where needed.
- "What could go right?"
- People always seem to think of what could go wrong, but it may be more appropriate for investors to ask themselves what could go right. If we aren't positioned to benefit from positive developments in the market, we may miss out on great chances for our returns to compound.
- You'll be too late by the time you feel comfortable
- Investors often think they'll get back in the market when things smooth out and they feel comfortable. The problem is the market will have already jumped by that time. The market is forward-looking and extremely fast to react to new developments.
We are long-term investors, not short-term traders. The next time you feel worried about the election, consider some of these thoughts.
If you would like to view the full article by Kevin Cooper of AMG Funds, click here.