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Do political outcomes affect monetary and fiscal policy?

Do political outcomes affect monetary and fiscal policy?

October 22, 2024 Future Bright ,

2024 Q4 Market Commentary…

This year, more than any other election year, I’ve been fielding questions about how the outcome of elections might affect your personal investments. T. Rowe Price put out some data earlier this year that showed the average stock market return in election years underperformed returns in non-election years by just ½ of 1%. That is seen as statistically insignificant in the view of economists. Most investment advisors concur (me included) that near-term political outcomes should not alter longer-term investing discipline. Nevertheless, we sometimes do choose to reduce investment risk by holding more cash than usual heading into election day. I’m comfortable with this strategy, especially for those individuals nearing retirement age. I view it as an opportune time to take a breath and re-assess portfolio positioning.

Future BrightDo political outcomes affect monetary and fiscal policy?
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Increased Volatility Sometimes Happens in Election Years

Increased Volatility Sometimes Happens in Election Years

July 9, 2024 Future Bright ,

2024 Q3 Economic Commentary…

Election years are often marked by increased volatility. Investors are generally uncertain about potential policy changes and their impacts on various sectors. This uncertainty can lead to short-term fluctuations in stock prices. This is especially true when the election outcome is still highly unpredictable.

In many election years, a pre-election rally has occurred, particularly when the market anticipated a favorable outcome for business-friendly candidates. For instance, the Dow Jones Industrial Average saw significant gains in the months leading up to the 1984 and 1996 elections, reflecting investor optimism.

Future BrightIncreased Volatility Sometimes Happens in Election Years
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STAGFLATIONARY TIMES AHEAD?

STAGFLATIONARY TIMES AHEAD?

April 9, 2024 Future Bright ,

2024 Q1 Market Commentary…

For some portfolio managers and investors, the desire for Fed interest rate cuts is akin to that of a sugar addict’s desire for his or her next candy fix. Both are signs that there are greater problems afoot. I’ll stick with the interest rate discussion since I’ve been known to enjoy one too many desserts, and I don’t qualify as a pillar of optimal health.

An interest rate cut is done for one of two reasons (or both): 1) to stimulate a weak economy; or 2) to dig an economy out of recession. Money is less expensive to borrow when rates go lower, which allows consumers to consider more and bigger purchases. In terms of credit, lower rates increase purchasing power, which can have a ripple effect as it stirs up more economic activity. Nevertheless, a rate cut is still an admission that the economy is not in good health. The reality is just because we have more credit capacity to work with doesn’t mean we should use it. See www.usdebtclock.org for reference.

Future BrightSTAGFLATIONARY TIMES AHEAD?
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Are you onboard with the A.I Supercycle?

Are you onboard with the A.I Supercycle?

February 6, 2024 Future Bright ,

Seldom do I write in between my typical quarterly cycle of economic commentaries, but I feel compelled to do so today. Do you know what an economic “Supercycle” is? Depending on how old you are, you have witnessed at least one or two in your lifetime, and some of you have witnessed more. An economic Supercycle is a sustained period of expansion usually driven by robust growth in demand for products and services. (I pulled that definition from a Google search, which now seems so antiquated considering what lies ahead.)

Examples of macroeconomic Supercycles include the industrial revolution in the late 1800’s and the information technology revolution of the last 25 years, just to name a couple you are familiar with. For investors, Supercycles are economic tsunamis of innovation that create significant wealth opportunities for those who can both see it coming (but may not be able to define or describe it) and who are willing to risk their investment dollars to benefit from it.

Future BrightAre you onboard with the A.I Supercycle?
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Let’s get on with it, 2024

Let’s get on with it, 2024

January 10, 2024 Future Bright ,

2024 Q1 Market Commentary…

The market finished off Quarter 4 of 2023 on a welcomed high note. Stocks and bonds got a significant lift from the talk of disinflation and potential interest rate cuts in 2024. The most overused term in finance – “soft landing” – is still the hope of investors going into the new year.

Speaking of the new year, I saw the perfect meme to describe, perhaps, the collective feeling of every American heading into 2024. It is a picture of a tiger laying in the grass enjoying a deep sleep until into the picture enters a man who sneaks up on the tiger ready to finger flick its tail. The caption reads, “Let’s get on with it, 2024.” Sometimes, a picture is worth a thousand words.

Managing assets through a macroeconomic lens should always garner the most attention, but there is a penchant from investors to try to predict market moves through the lens of politics in presidential election years. We hear the questions repeatedly on financial news networks day after day heading up to election day.

Future BrightLet’s get on with it, 2024
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