"NEVER BET AGAINST AMERICA!"|CROUCH CONNECTION, October 4th, 2020 "ADV"
by Dave Crouch
NEVER BET AGAINST AMERICA!”
2020 has just been a roller-coaster! Going into 2020, the markets couldn’t have been more promising. Election years are typically good for the financial markets and all indicators were that we would have a good year. And then out of the blue, the Coronavirus swooped around the world and shut down one economy after another, eventually bringing our lives to a screeching halt.
As we approach the Presidential election, it seems the uncertainty has ratcheted up every time we turn on the news. As we attempt to discern who is likely to win the Presidential election (and even more importantly, the Senate races) and the likely effects that will have on the markets and our financial situations, the uncertainty just seems to go up every time we think about it. Now the latest shock to our senses comes with the news that our President has contracted the virus!
MAXIMUM UNCERTAINTY = MAXIMUM OPPORTUNITY
The natural reaction for many investors when faced with massive uncertainty is to run away…to get out and wait “until things settle down”. Unfortunately, that is usually the wrong course of action.
Look at the chart below and see where your emotions lie.
Let’s be honest here and admit that the uncertainty created by the pandemic in the midst of an election year is about as high as it can get. It would be natural here to feel a certain amount of fear and anxiety about the market when your financial future is dependent on its long-term direction. But as you can see in the illustration, that is usually a good time to be adding to your portfolio, not pulling out.
Let me repeat a quote that we used in our October, 2016 newsletter by Mark Mednansky, the CEO of steakhouse restaurant chain Del Friscos’:
"During any election cycle, once there is a victor, usually there’s a big sigh of relief and people go out and spend, and they’re hopeful. And that’s what we think will happen because it’s happened so many times in my history in this industry.”
“One rule you can usually depend on is that the market low for the cycle will be the day that represents the absolute highest point of uncertainty and anxiety about the economy and markets. In other words, the best buying opportunity we might have. Hopefully we will get that “big sigh of relief” after the election and see the market break out of this frustrating trading range!”
As it turned out, that is exactly what happened in 2016. If history repeats what often happens with Presidential elections, the dire predictions will turn out to dissipate and our great nation will continue to do okay.
The future is bright, no matter who's in charge
Warren Buffett always seem to put things in perspective best. In his shareholder letter released in February 2016 (prior to the 2016 Presidential election):
“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history.
For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.”
He repeated this sentiment in his recent 2020 virtual shareholders’ meeting:
“While we haven’t faced anything that quite resembles this problem before, the United States has faced tougher problems and overcome them in the past.
I remain convinced…nothing can basically stop America. The American magic has always prevailed and will do so again.”
Our emotions definitely are challenged by the negative drumbeat of the media, but it is our job to filter the noise and help our clients and friends make good investment decisions in spite of the confusion. Please give us a call any time you are feeling queasy or need a personal update. We always enjoy hearing from you.
Registered Principal Branch
Branch Operations Manager
Warren Buffett Quote:
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. “
Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results