The Art of Human
Our purpose at Fjell is to serve families through financial planning and asset management to make their lives better.
Equal parts of art and science are used to do this for clients.
Much of what people think we do is the science part of the job – the math, investing, optimizing cash flows, taxes, numbers, ratios, etc.
It is the foundation of what we do.
But before a foundation is built, something else needs to happen: somebody needs to design the thing that is going to be built.
This idea of design is where the art form of wealth management comes in—partnering with families, exploring their past, understanding what they want to build, and crafting a vision of what could be.
Once that is done, we build the financial plan and start investing.
But aren’t we supposed to talk about politics?
Yes, and here’s why this art-then-science thing matters and why I gave that analogy.
Politicians are designing narratives right now to attempt to earn our vote.
In doing so, and rightly so, they talk about the economy a lot.
You and I rely on a healthy economy for our future and the futures of our children and grandchildren.
The politician’s push to make us decide what we want to do on election day makes us question the very portfolios that fund our retirement dreams, college educations, and emergency accounts.
How do I know this?
I’ve had conversations about this with clients 100% of the time over the past six national election cycles.
Election cycles stoke up the flames of what could be, and people ask themselves, and me, “Do I need to change my investments because of all the rhetoric?”
Artists take a blank canvas and create something.
Candidates are trying to do the same thing.
And we are the canvas they are painting on.
Let’s look at history to see what other investors did with their money around election time.
The Markets Care – Sort Of.
Since 1950, during election years—the years when the political winds are blowing the hardest—the markets have been up 9.1%, on average.
Furthermore, check out this graphic outlining the returns of different compositions of US governments.
Past performance is no guarantee of future results. Data excludes 2001 to 2002 due to Senator Jeffords changing parties in 2001. Calendar year performance from 1933 through 2022. Source: Strategas Research Partners, as of November 5, 2023.
Pretty typical for most of the time.
While election coverage is dominating mainstream media right now, the market’s gaze is actually elsewhere, on the Federal Reserve’s interest rate policy, key economic data, and company earnings.
The market cares about the President, to a point.
Here are a few charts from Vanguard:
This graphic outlines the classic 60 / 40 portfolio’s performance over time. The green bars represent election years, and the light gray bars represent non-presidential ones.
My not-so-hot take: there’s not much to see here. The 60 / 40 portfolio had similar returns regardless of whether it was an election year.
Here is the final chart I will show you. It measures market volatility during a presidential year.
Think of volatility in the stock market as the % of people who are freaking out and selling.
My not-so-hot take on this chart is that there is not much to see here.
The significant volatility comes from recessions, not elections.
All of this isn’t to say that the political winds don’t affect markets; they profoundly impact your portfolios. This edition is about the markets around election time.
As you know, it’s impossible to know election outcomes ahead of time, and it’s also impossible to know what markets will be like in January when the next President is inaugurated.
So historically, the markets have largely shrugged elections off and, assuming there isn’t a recession surrounding the election, given investors positive returns.
The Finale
Elections matter. They do.
Do the markets care about them? Sort of.
Here’s the thing: while politicians work their tails off to sway our vote, despite all the noise and drama surrounding elections, the fundamentals of investing remain the same.
Your money thrives on long-term vision, not short-term political rhetoric.
So, what should you do then?
Stick to the plan, buy great assets, and focus on the basic principles of personal finance.
In politics, they say, “It’s the economy, stupid.”
When it comes to money, “It’s the basics, stupid.”
Let these data points from the past hundred years give you the confidence to keep building and buying great assets. Refer to this edition whenever election fever grips the media and tempts you to stray from your financial plan.
Remember: you’re not building wealth for the next election cycle. You’re building it to last decades.
