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Have you noticed that when the media talks about how investors approach investing activities, it is almost never “investors invest”? The most common action verbs the media uses with investors is that they “bet” or “play”. Apparently, the media doesn’t know the difference between a gambler betting on the roll of dice or a series of numbers and someone who invests in public companies.
But let’s go along with the media. I’d like to answer this Wall Street Journal headline on Sept 9, 2024.
Playing the Sectors
Since presidents and administrations have favorite policies, it seems like certain sectors may benefit more than others the sectors. That seems pretty straightforward, but history shows it isn’t.
The following chart shows sector performance under various presidents. Perhaps the most surprising was that of energy. Energy policy is generally positive with Republicans and restrictive with Democrats. In fact, one of President Biden’s first actions in office was to cancel the Keystone XL pipeline – not an energy-friendly move. And yet, energy lost 16% during Trump’s tenure and went up 47% under Biden.
This illustrates that even when we get the policy right, we don’t know how the markets will respond. The markets and economy are much more complex than a political administration and policies.
Playing the Stock Market
Should we play the overall stock market? FoxBusiness reported that famed hedge fund manager, John Paulsen, said he will pull out of stocks if Harris wins. John Paulsen represents “smart money”. So, is this smart? Should you do the same? History is very clear on this.
Investing based on political beliefs or political outcomes is emotionally desirable, but history shows it can be a very costly endeavor.
The Surefire Way to Play the Election of 2024
The surefire way investors can play the election of 2024 is to choose to not play. Leave the playing to the speculators. Companies adapt and adjust to the hand they are dealt with. They have a history of generating earnings growth irrespective of president and policies, and stock markets historically follow earnings.