As the DNC convention concludes, we now have our two Presidential candidates and about 100 more days of campaigning before the Election on November 8th. In a year of unprecedented dislike of both candidates, billions will be spent trying to convince voters. What a waste.
The Supporters aren’t Changing. Trump and Clinton supporters aren’t changing their minds. One Trump enthusiast was asked what it would take for the Donald to lose his vote. His response: “Nothing. There is nothing he could do to lose my vote.” To his supporters, Donald Trump is going to make America great again. “He’s rich and can’t be bought.” “He speaks his mind.” “He’ll get the job done.” Those who oppose him often believe him to be a narcissistic buffoon, liar, racist, and woman-hater; unfit to be president.
Hillary Clinton’s supporters believe she is the only qualified candidate, the only one capable of being commander-in-chief and, of course, she isn’t Donald Trump. Those who oppose her believe she is a phony, part of the establishment that caused their economic woes, and has a long history of corrupt episodes including the recent FBI investigation into the “extremely careless” use of her private email server.
For supporters, new information makes no difference. “It really goes back asswards, lots of times,” said Peter Ditto, a psychologist at UC Irvine. “People already have a firm opinion and that shapes the way they process information.” Psychologists call this “motivated reasoning” meaning that once a person selects Trump or Clinton, they tend to downplay or ignore things that paint their candidate in a bad light by forcing new information to fit within pre-existing beliefs. Even lies don’t matter. Many people would rather hear an appealing fib rather than an ugly truth. And politicians know that for sure.
Investors like Clinton. Americans with money in the markets prefer Clinton. They love divided government and are assuming the Republicans will control Congress and Clinton would be held in check. Actually, for all their promises of sweeping changes, U.S. Presidents can’t do much without the House and Senate. Furthermore, Republican House Speaker Paul Ryan has his own ideas, different from Trump and Clinton on taxes, trade and other matters. So, we’ll likely have a divided government in any case.
Wall Street seems to think that it is highly unlikely that Trump will win. Of course, think back to Brexit, when the “Remain” camp was certain they wouldn’t lose. If he did win, Trump would likely move quickly to get the U.S. out of NAFTA and perhaps put tariffs in place on Chinese and other goods. This could lead to a “trade war” which would most likely hurt the U.S. and world economy.
The Race will likely remain too close to call. With more than three months remaining, we will continue to be bombarded daily with media coverage, emails and phone calls. Like Brexit, it will likely come down to voter turnout. There are many angry, disillusioned Americans these days. They question is which ones will show up in droves on November 8th.
Impact on Investments. When Britain voted to leave the EU it surprised investors worldwide. In the U.S., markets initially declined 5-10% and many investors bailed out. It took the markets just a few days to realize that Brexit is a UK problem, not a U.S. issue and since then the S&P 500 Index and Dow Jones have hit all-time highs though demand remains high for “haven” assets; for example, government bonds and gold.
Investing based on world events is nearly impossible. UK politicians, property owners, businesses and bookies got all it wrong. Timing the market, both entrance and exits, is impossible. Longer-term investors know that you need to look beyond short-term events like Brexit, Kennedy’s assassination, the 1987 market crash and 9/11 to see that each had a short-term downside and fear followed by a return to fundamentals. It’s prudent to leave the short-term noise to short-term traders.
Let’s focus on staying invested in a globally diversified portfolio with an appropriate asset allocation. Yes, diversification may be boring, but it works. We can control our behavior, but there are lots of things we can’t control, including the U.S. Presidential election. So, enjoy the Greek drama as it unfolds. Not sure we are watching a comedy, tragedy or satyr (featuring lustful, drunken woodland gods). Regardless, don’t let it stress you out. Enjoy the rest of the summer and focus on what you can control.