The Election, Predictions and the Markets

Like many of you, I voted today.  I am not sure if my candidate will win, but I made sure that there would be no doubt for the machines to determine  who it was that I was voting for.

After perusing several websites to read about the elections, I switched over to the financial websites that I typically visit.  What I found was that the same type of bloviations coming from the financial websites/tv channels are coming from the political websites/tv channels.  People are making predictions.

Obama is going to win!  McCain is a change!

The markets are going to go down!  The markets are going to go up!

Fortunately (or should I say hopefully), tomorrow when we wake up, we will know who the next President of the United States will be.  Unfortunately, we do not know how the markets are going to react.  There are predictions that the markets will go in all directions, based upon who will win.  And while everyone seems to have an opinion this year as to who is best for the United States of America - as do we - Aubry & Eustice will still be providing advice for you and what is best for your portfolio.

Some say that a McCain victory will rally the markets.  Others say that an Obama win would be better for the markets, as an Obama presidency is already “priced in to the markets” and anything other than an Obama win would scare the markets and cause more uncertainty (volatility).  There are several other “predictions.”

During this past year I have received two questions that have really surprised me:

Will the markets recover if McCain wins?

Will the markets recover if Obama wins?

What is really meant by these questions is:  Will my portfolio grow if McCain is elected? OR Will my portfolio grow if Obama is elected?

The answer to each of these questions depends upon how you answer each of the following questions:

1. Do you have a globally diversified investment strategy that understands the relationship between risk and return and the important factors that provide for increased returns without increasing risk?
2. Do you have a strategy that provides a hedge against too high of an exposure to the decisions of any one specific government?

If you answer each of these questions with “Yes” then your portfolio will probably recover fairly quickly and help you reach your goals, regardless of who is the President of the United States of America.   If you are working with Aubry & Eustice, then you can answer those two questions with a very confident “Yes.”

While the country seems to be very divided, no matter who wins today, the Republic will survive.  And, as long as there are free markets around the globe, investors will have the opportunity to make a profit in the future; as long as there is a profit motive, markets will recover and do quite well into the future.

Comments are closed.