Business Innovators Radio - Episode #55 – Investing in a Presidential Election Year – The 15 Minute Financial Feast Podcast-With Mark Triplett & Troy Westendorf

Episode Date: December 21, 2023

We believe that every dollar has a purpose and a timeline. When and how your retirement assets will be used should be understood before making important financial decisions.The Triplett-Westendorf Purpose and Timeline 5 Step Planning Process (PT5) begins with Discovery.Understanding where you are now, and then defining where you want to go (Your Purpose) and when you want to get there (Your Timeline), programs your financial GPS. Our Purpose and Timeline 5-step process (PT5) programs your financial GPS.Learn more: http://triplett-westendorf.com/ | https://mypt5.com/The 15 Minute Financial Feast Podcasthttps://businessinnovatorsradio.com/the-15-minute-financial-feast-podcast/Source: https://businessinnovatorsradio.com/episode-55-investing-in-a-presidential-election-year-the-15-minute-financial-feast-podcast-with-mark-triplett-troy-westendorf

Welcome to the 15-minute financial feast podcast, bringing you 15-minute segments to help you retire with purpose on time. We're serving up food for thought and bread for the head. Are you hungry to learn? Here are your hosts, Mark Triplett and Troy Westendorf. And welcome to another episode of the 15-minute financial feast. I'm your host, Mark Triplett. And I am Troy Westendorf. And today we decided to talk about the upcoming election year.

We get a lot of questions, it seems, every four years. It happens to during a midterm election, but definitely during a presidential election. We get a lot of questions from folks who are seemingly concerned about market volatility and a presidential election year. In fact, Troy, many times folks will say, I think I just want to. to sit in the sidelines in cash until we wait to see how this election turns out. How often have you heard that one? I hear that quite often. I also hear which party.

Like, you know, if a Democrat gets in, the stock market's going to do this. If a Republican gets in, a stock market's going to do this. And so now they're worried about which party is going to get into office as well as should I sit on the sidelines. Should I invest? Should I not invest? Should I get out? What's going to happen?

is it going to be bumpy. I'm not sure because so-and-so might get into office. What will that do? And I think a lot of it comes to the news and the media, pushing this stuff, you know, trying to get people worked up on what's going to happen in the election year now. You nailed it. It really, I think this fear or the concern that happens

during a presidential election year is mostly manufactured by media outlets who are trying to sell. advertisement, advertisement for toothpaste or automobiles or pharmaceuticals. And in order to do so, they have to have eyeballs. And those eyeballs, the way they attract those eyeballs is through fear and creating anxiety. And I'll often tell folks, you know, if you just turn the TV off and stop watching the news, your life will improve dramatically. But particularly in a presidential election year, we have folks who are concerned about market volatility going into a presidential election, regardless of which party may end up winning,

there seems to be this concern and desire to kind of take my chips off the table for a little bit, just to see what happens. And it sounds logical, right? There's going to be market volatility. I don't want to participate in that roller coaster ride. however, it just doesn't work out very often in that person's favor. In fact, statistically speaking, out of the last 22 election cycles, the decision to go all to cash and pull your money off and sit on the sidelines to wait to see what happens only works out to be the best strategy about 13% of the time. It happens to be the worst strategy about 70%.

2% of the time. So almost three quarters of the time, going to cash during a presidential election cycle is the worst strategy you could have chosen. And part of that comes down to, you're trying to market time. And none of us are going to get these two parts of the equation right. You might, when it comes to market timing,

you have to decide when to get out. out and also when to get back in. And you might get one of those right. Now you might get out before a big steep market downturn and think, ah, I'm smart. I got out right before the stuff hit the fan. Right. But then getting back in or knowing when to get back in and enter into the market is

the second part of that equation. And it's impossible to predict. And it happens so quickly. And I'll use, this is going to date this podcast a little bit, but we're sitting here in it's December of 2023. September and October of this year were really rough periods for the stock market. And it tested the resolve of a lot of folks. And over about a span of five weeks,

the market lost considerable value through the end of September and October. But in the month of November, and actually only in a matter of a couple of weeks, the market came roaring back. And so if you had gotten out during that period of time when the market was down, with the intention you're going to get back in when the getting's good, you missed it because you blink and it's gone. And that's one of the reasons why folks make a mistake in a presidential election year. They have that, what's logical to them, get off the sidelines,

only to miss out on the tremendous momentum that usually happens during a presidential election year, regardless of the color of the tie of the winner of the election. The market doesn't care. There will be certain sectors that will do better than others. There will be certain sectors that do worse than others, depending on who wins and what political parties in power. But the overall market does well when there is certainty. And at the end of an election, there is now certainty at least of who will take the reins at least for that period of time. The market tends to settle down and race.

And you're just going to miss it if you blank. And I think that comes back to emotional decisions and not having a plan. I think when you think emotionally without a plan, you tend to go with what you feel like as a majority. And when you listen to the news or you hear some of this talk, feels like everyone's going in this direction. Everybody should be getting out of the market. Everybody should be panicking right now. And I think that's the biggest thing we see is when we meet with new prospects that do not

have a plan, we hear about these things. Oh, I got X amount of dollars sitting in cash right now because I'm not real sure what the markets are going to do. And you look at all these opportunities that they're missing out on because they're listening to someone, whether it's a coworker, whether it's the news. and they're taking their advice and listening to them and pulling their dollars out of the market because they're uncertain on what's going to happen.

And most of the time it's because they don't have a plan in place. You nailed it. They are making a short-term decision based on emotion that will oftentimes have long-term impacts in the outcome of their transition into retirement or what resources they have to transition into retirement, rather than being long-term investors. And it's very difficult to be a long-term investor

and have resolve when you don't have a clear plan in place that helps you decide, what is the purpose of a dollar and what is the timeline of a dollar? We've come to appreciate that over time, the market does well. Right. And over time, you know, given time, we can count on the market to give us the best opportunity to produce a return that will outpace inflation over time.

But in the short term, and we're talking, when I say short term, I'm talking less than 10 years, but in particular, 12 months, 24 months, we can have a lot of market volatility. But given time, the market tends to do very well. and you have to stay invested. You can't just be pulling your chips off the table and trying to figure out when to get back in because it's a presidential election year because you'll miss out on a ton of opportunity. And we recently came across a report put out by Capital Group. Right. If anybody has ever owned American funds, those are Capital Group funds. American funds are.

And Capital Group put out this nice piece that kind of explains. that it is basically validating something we already knew, but that the market doesn't really care whether your candidate or the opposing candidate got in or not. The market during a presidential election year tends to be most volatile during the primaries. And this is anecdotal, but perhaps there's some validity to this. that's the time of the most uncertainty. You know, when primary candidates are trying to hash each other out, there's starting each other in the back.

But then there's become some unity later on when a candidate is chosen. And now you have, you know, the two parties have their, their horses in the race. And leading up to that election and through the election, getting past the primaries, volatility settles down. And the market tends to do very well on the tail. tail end of a presidential election year. And that's, I think, why we chose this topic today is to really help folks appreciate the fact that the presidential election year isn't something to be fearful of.

It's something to, historically, to stay invested and stay the course because you're going to come out on top more often than not. Going to the cash is typically a poor decision. but actually staying invested, and particularly if you're making contributions to retirement plans, making contributions and continuing to do so, that works out the majority of the time to be the most favorable decision you could have made in hindsight versus going to cash. I can't reinforce that enough. Going to cash would have only been the best choice 13% of the time. It would have been the worst decision.

72% of the time, according to this report by the capital group, out of the last 22 election cycles. And everybody always says, well, this time's different. Right. Maybe. I mean, how many times have we been hearing that for the last 20-some years? Yeah. History tends to repeat itself.

When you look at that, though, even like you said, in the primaries, markets may go down. We know the month of September is not typically good month either for the markets. So why wouldn't we just say, you know what? September, we pull out, we go to cash. Primaries, we pull out, we go to cash. And then avoid that what we think is going to be a rocky position in the markets. It's a fair question. We just don't know the timing of when that's going to happen.

And the market jumped between 8 to 10 percent, depending on which index you're looking at in the month of November. number. If you had exited the market in October because you were just fed up and had enough of this terrible stock market, I'm getting out, you wouldn't have known to get back in November. You'd still be on the sidelines panicking because you're nervous and you would have missed out on that opportunity.

And it just happens so quickly. Our chief investment officer once described the market, we're talking about the the stock market, which is publicly traded corporate America. He described it as a beach ball in a pool. And it takes a lot of pressure and downward force to get that beach ball submerged. You keep pushing down and keep pushing down and keep pushing down. Just like September and October of this year. It took weeks and weeks and weeks of just negative sentiment, negative sentiment,

and the market kept selling off, it's selling off, getting down. But what happens when you take your hands off that? submerged beach ball in the pool. It comes shooting back up to the surface and oftentimes blows right out of the wall. And it happens so quickly, you don't have time to react to, you know, air quotes, get back into the market. It's done.

It's happened. And it's like, or another example might be an elastic band. You pull and you pull and you pull and you pull and you pull and you let it go and it comes flinging back. If you're going to be in the market, have a plan. Do it worth resolve. Don't be a market timer. At least don't come to us expecting that.

That's not what we do here. We help folks make good long-term decisions with a clear vision of where we're headed in the future. And once we've determined what the purpose and timeline is for particular resources in somebody's plan, we may allocate some to the market, but it's generally money that they don't need for a decade. It doesn't mean it's not money we couldn't get out if we needed to. It's liquid. But it's money that we don't in the plan generally need for. for at least 10 years or longer that we're willing to put it exposed to the market.

So we're not dealing with day traders or market timing. That's just not what we do here. We help folks draft a plan, a blueprint for their future. Once we've determined what's appropriate for market investment, we do that in a manner that is trying to mitigate risk during a downturn and optimize opportunity during an upside or during a positive period of the market. But it's about staying invested for the long term. And presidential election is no different. We encourage our clients to stay invested when the market's down or the markets has a lot

of volatility and short term market prices are suppressed. That's the time to be buying, making contributions to your plans, not the time to be panicking. And it pays off in the long run. Yeah. Stay calm. Keep calm. You'll see around the office here, rarely do we get worked up when there's a market downturn. Because we know there's a plan in place. We know this happens with the markets. And we know long term with the plan, we're going to be in good shape. And generally speaking, those downturns give us opportunities to take positive action rather than panic.

Like Roth conversions, like making contributions, buying shares while they're cheap. It's counterintuitive. And usually folks who have been with us for a while see those opportunities. And sometimes they call us and say, hey, is it time to do that Roth conversion? Or, hey, I've got some cash, it's time to buy. But new clients, folks that haven't been with us for a while, sometimes look shocked when we say, hey, the market's down. This is the time to put more money in. They look at us a bit like we're crazy.

But remember, we're buying corporate America. We're buying names of companies that people, they make, these companies make products or offer services that people need or want to buy. And once we kind of go through, you know, what are we actually buying and why are we buying? Because it's cheap. It's a great company. We want to buy it now while the market's down and take advantage of that. Then they tend to get it. But don't be, don't want the media get you all worked up in a presidential election year.

The odds are in your favor if you stay invested. that long-term you'll come out better than panicking and going into cash and, quote, sitting on the sidelines. That strategy just doesn't work very often in presidential election year. So hopefully this will help you make a positive decision here going into 2024. Do you have questions about your financial plan, questions about any of your retirement accounts. Feel free to reach out to our team here. We'll be happy to feel those.

questions for you. Perfect. You've been listening to the 15-minute financial feast podcast. Remember, every dollar has a purpose and every dollar has a timeline. If you have questions about today's topic, schedule a call with a team member. Visit www.w.com. Until next time, be sure you're taking steps to retire with purpose on time. Mark Triplett is an investment advisor representative of and advisory services offered through Royal Fund Management LLC, an SEC registered investment advisor. Nothing contained in this program should be considered an offer to buy or sell securities.

Different investments have different risks associated with them, and not all investments are appropriate for all investors.