Which President Is Best for the Stock Market?

I'm going to give you my answer to this question before we even get started.

Answer: It doesn't matter.

I get it; this is a terrible answer!

You'll never see someone say this on TV or the media because that wouldn't sell or draw eyeballs.

The media needs to paint a narrative for you to watch and tune in.

To do so, they'll tell you all the ways to position your portfolio ahead of the election. This is often done by very smart people who fail at predicting the stock market (but they don't tell you that either).

Here's something I tell my clients all the time...

Don't let short-term predictions, opinions, or guesses impact your long-term money.

Now, I don't want to downplay the election and say this doesn't matter at all. It is important and can influence some short-term things like tax laws and policies. But that's nothing new and usually expected.

Today, I want to explain why the president really doesn't matter to your long-term investment portfolio—or, maybe, a better way to put it, why it should matter less than you think.

I want you to focus on one thing. Your long-term money.

This is money you have invested for a future goal. It's invested (likely in the stock market or other assets) to earn a return that will compound for a decade (or two or three), so your money can eventually work for itself.

The bottom line is that invested money is money you aren't planning to use today, tomorrow, or the next four years.

How the stock market will perform under this president or that president is a very short-term thinking. And usually, it's not worth the brain damage.

Nobody knows with any accuracy how stocks will perform based on the next president, although many will make predictions that won't come true, as we have seen in the last two elections.

To illustrate this long-term perspective, let's zoom out and compare how the stock market has performed if you only invested during a certain political party versus staying invested regardless of the party.

Even with all the bumps in the road along the way, you can see what won in the past. Anyone who let their political favorite drive their investment decisions likely left a lot of money on the table.

It's also true that every president will experience a down market. Especially since, on average, stocks are down one out of every four years.

If we look at the US stock market performance by election cycle, over the past 92 years, the S&P 500 Index has performed positively 73% of the time and has averaged a yearly total return of 11.54%!

As you can see, on average, the stock market has gone up and rewarded investors regardless of who the president is. If you're a long-term investor, that should be your main concern.

This is exactly why a long-term investment plan that you can stick with is so important.

On the other hand, if you have any short-term concerns (elections or life in general), this is what cash and safe bonds are designed for. So you can have some short-term stability for all the unknowns.

Because you're a long-term investor (and the election is a short-term event), it's always best to keep politics out of your investment portfolio,

So what should you do instead?

Since we now know the presidential election has very little impact on long-term money, where should you focus your time and energy?

Here are a few ideas:

• Your savings rate
• Your asset allocation
• Your spending and cash flow
• How you approach your tax planning
• Your estate plan and making sure you are properly insured

These are controllable and can create a much better outcome for your financial plan than worrying about how the next president will impact your investments.

Travis Gatzemeier, CFP?