Fix it Friday Ep. 2 - Never Mix Politics and Investing

• Mixing politics and investing is a mistake. Historically, long-term market returns have been consistent regardless of political party, averaging 10.7% under Democratic regimes and 10.5% under Republican ones.
• In 20 tracked decades, only one—2000 to 2009 under George W. Bush—saw flat market returns, driven by significant events like the dot-com bubble burst, 9/11, and the global financial crisis, rather than political affiliation. Interestingly, the best-performing decade, 1988 to 1997 under George H.W. Bush, delivered 18% annual returns, with stocks increasing fivefold.
• History shows that market performance over the next decade will likely be substantial, regardless of election outcomes. While this election has been highly partisan, bitter political divides are nothing new—dating back to 1803 when Vice President Aaron Burr fatally dueled Treasury Secretary Alexander Hamilton.

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Voice Over: Welcome to the crazy wealthy podcast with your host, Jonathan Blau, whether you're just starting out or are an experienced investor, join Jonathan as he seeks to illuminate and demystify the complexities of making consistently rational financial decisions under conditions of uncertainty. He'll chat with professionals from the advice world, entrepreneurs, executives, and investors.

Jonathan: Welcome back to Fix It Friday, the [00:01:00] segment of Crazy Wealthy Podcast that's designed to be a short version, five to 10 minutes, where we identify through looking at current events, some biases that we're all prone to make, how to identify them, how to overcome them. And today we'll be talking about.

elections, politics, and how those ought to be factored in to our investment portfolios. So let's start by saying in all of my experience in the industry and everything I've read historically about past elections and political environments, it's a very bad idea to mix politics and investing. And so, One of the things that that I'll do is bring, bring everybody through a a history of past elections, just to, just to take a look at since 1936, what's happened in the aftermath of, of elections.

And by the way, since 1936, we've had about 23. [00:02:00] Elections the outcomes of those elections that we had 20 of the 23, we had 12 Democratic presidents elected and and 11 Republican presidents elected. So, what's interesting is the average return. For the 10 year periods where returns available are available.

What I mean by that is of the 23 elections, there are 20 of the elections where there are 10 year track records that we can look at for the return of the standard of force 500 index for the return of stocks broadly in the U. S. And Under the Democratic regimes, we saw returns that averaged 10.

7 percent annually. And under the Republican regimes, we saw returns that averaged 10. 5 percent annually. So there's no meaningful difference in the long term averages of returns under either the Democrat or Republican regime. And, and what's interesting is, There's only been one 10 year period of the 20 that [00:03:00] have available track records where we didn't have a positive return.

And that was at 10 years with, with . Yeah. The younger George Bush was the president, and that was from 2000 to 2009, and that had really nothing to do with the president's political affiliation more than the fact that that decade from 2000 to 2009. Saw the dot com bubble burst, followed by the 9 11 terrorist attacks, and then four or so years later, followed by the worst financial crisis in modern times the, the, the global credit crisis.

So, and by the way, the 10 year period that I'm referring to, the returns were flat. What's interesting is, the best returning 10 year period was, was the period from 1988 to 1997, and that was George W. Bush Senior coincidentally, and during his 10 years, the returns were about 18 percent a year stocks actually went up five fold during that decade.

So, the worst 10 years and the best 10 years. were attributable to [00:04:00] the father, the son of Bush political dynasty. So that's just an interesting tidbit. So what's also interesting is that what I take away from it, based on all of history, the 10 year periods following an election year, 95 percent have been positive and have averaged.

Over 10 and a half percent, 10 and a half to plus percent a year. So based on that, it wouldn't be unreasonable to expect that the next 10 years ought to be good, regardless of whether or not one agrees with who's been elected president. And so the interesting thing is this has probably been one of the most bitterly partisan elections in history.

Bitter partisanship when it comes to elections. Dates back to 1803 when the sitting vice President Aaron, by disagreed with the first treasury secretary Hamilton, challenged him to a dual and killed him. So, so again, bitter, bitter partisanship is not unique. In fact, in in more modern times in 1803, the the, the newspapers declared that Dewey [00:05:00] was victorious against Truman in the 1948 election, when in fact Truman had won.

And a fellow named H. L. Mengen, who's known as the Sage of Baltimore, he was a journalist who, who wrote for the Baltimore Sun, and he said, this is it. The end of everything, when Truman was elected, there were fears that he, that Truman was a communist, and, and many things were going on then, including, we had boots on the ground entering into Korea we had the Soviet Union acquiring the A bomb, and, and we had fears of of, of investigations regarding it.

Communist subversion running rampant through the country, tearing the country apart. So with all of those things going on, had one reacted to the fears or what I call political risk aversion bias, right? Where we, where we react to the perceived risks associated with a new political climate by selling our portfolio in response to what they would have done is they would [00:06:00] have missed out those investors with all of those things that I just mentioned going on that would have missed out on four of the best years historically in the markets.

The markets went up by half 50% between 1948 and January 52 when Eisenhower was elected. And in fact, when you included dividends went up almost a hundred percent. during that period. So, so mixing politics and investing has, has generally never been a a good idea. One of the things I'm going to leave you with is a video at the end of this podcast that you'll be able to see in that notes section, where one of the wisest investors and most successful whoever lives, who fortunately is still with us, Warren Buffett talks about his experience.

And, and perspective on politics and investing. It's definitely worth a listen. It's two minutes. And with that I look forward to speaking again in a couple of weeks. Until then wishing everyone a happy Thanksgiving. In the meantime, you can listen to these podcasts, Crazy Wealthy in General, and the [00:07:00] Fix It segments.

on crazywealthypodcast. com. You can go to fusionfamilywealth. com, our website, and you can also listen on your favorite venues, everything from Apple to Spotify to iHeartRadio and, and all of the popular venues. Thank everybody so much for tuning in and we look forward to having you join us. On the next episode,

Voice Over: thank you for tuning into another episode of the crazy wealthy podcast for more insights, resources, and to sign up for our newsletter, visit crazy wealthy podcast. com until then stay crazy. Wealthy.

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