This Week’s Blogger: Scott D. Heins, CFP®, IAG Chief Investment Officer
I am writing this blog on Monday afternoon, envisioning what reality will be on Wednesday morning. That is always a dicey proposition.
First, on Wednesday morning I envision that I will be very happy that the onslaught of gloomy, accusatory, negative advertisements will disappear overnight. Estimates are that candidate campaigns, political parties, and outside organizations probably spent around $114 million on the Wisconsin race for governor and $160 million on the Wisconsin race for U.S. Senate.
I can think of a lot better things to do with $274 million. With a voting-age population around 4.5 million adults, I think Wisconsinites may have been happier just receiving a check for $61 a piece and leaving us alone to make up our own minds.
Second, I don’t think the national elections will be over on Tuesday night or even Wednesday morning. Given the large number of theoretically close races, the huge number of absentee ballots in many states, and potential additional scrutiny on the ballot counting process, the odds favor a more time-consuming process. Throw in a likely run-off election for the U.S. Senate in Georgia, and we have all of the ingredients for delayed final results (yet again).
Third, I don’t think the timing or the results from this election fundamentally alter the trajectory for the financial markets over the next two years. The financial markets generally appreciate divided government for the legislative stability it typically provides. The markets have long expected this election to result in divided power and have likely priced in that outcome. If voters choose to retain single-party control that would be a surprise to the markets.
Fourth, historically mid-term election years are rough for the financial markets. This one has been rougher than usual and there is absolutely no way to know if it will follow previous patterns. However, in mid-term elections years the financial markets tend to exhibit weakness from summer into the elections with a bout of positivity after the election uncertainty is resolved –regardless of which party received more votes. I think this year could potentially follow that pattern barring unforeseen negative events.
Finally, having worked on Capitol Hill for four years, I have seen first-hand the ebb and flow of political capital over election cycles. Nothing is as temporary as an election win/loss. The results of this year’s elections could easily be reversed by the voters on November 5, 2024. Tying either your long-term portfolio or your mental well-being to short-term politics is a recipe for potential disaster.
The math for the financial markets so far this year has been fairly negative. Perhaps the aftermath of the elections will permit a more short-term positive direction to end the year.
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Quote of the week:
James Freeman Clark: “A politician thinks of the next election. A stateman, of the next generation.”