Market Resilience: Why Political Panic is Overblown

As we approach any election, the drumbeat of panic surrounding the potential impact on the financial markets grows louder. Every four years, clients and investors are inundated with alarmist predictions, typically tied to the "wrong candidate" potentially dismantling the economy. Whether it’s a conservative or progressive in the race, the claim is always the same — “This will be the election that destroys the market.” Yet, time and time again, history proves otherwise.

Let’s be clear: no single president wields the kind of power that could single-handedly tank or revolutionize the world’s largest economy. The markets are far more robust, and the levers of power far more diffuse, than political pundits would have you believe. Presidents, at best, can nudge the economy in one direction or another. The structural safeguards in place—Congress, the Federal Reserve, and the global nature of the markets—ensure that no administration can drastically change the trajectory without considerable time and resistance.

For example, ahead of the 2020 election, many were convinced that if Biden won, the markets would collapse. They didn’t. In fact, when SFA advised making only minor adjustments ahead of his victory, the portfolio performed well despite many fears. This is because markets react to fundamentals, not fleeting political narratives. The same logic applies to the possibility of a Kamala Harris presidency. While our firm won’t downplay the damage a poorly managed administration could do, it’s important to recognize the checks and balances that limit any president’s power.

That being said, if former President Trump were to be elected to a second term, as our firm believes will occur (as SFA projected in a social media post on 4/15/2024), we expect earnings increases primarily from national economic policy changes unleashing the full potential of America’s energy, America’s workers, and the American economy. SFA anticipates this happening very soon following the inauguration on January 20th, 2025. Folks, these coming policy changes are simple fixes, and they will quickly unhandcuff domestic energy production, constrain and reduce inflation, and create significant growth in America’s economy.

If Harris is elected, just as with Biden, we believe her policy changes could warrant making SFA portfolio adjustments. But panic is unnecessary! The market’s ability to adjust and adapt to political leadership is far more robust than many imagine, and history has shown that political landscapes shift, but economic fundamentals endure!

SFA believes investors should remain cautiously optimistic. Staying the course, making measured adjustments, and keeping a long-term view will serve us well in the years ahead—no matter who is in the White House.

The bottom line? Spectrum Financial Alliance will focus on strategy, not scare tactics, to ensure our firm’s clients’ portfolios are prepared for either political outcome! There will always be profitable opportunities. Our job is to find them, and we love doing just that!

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