One year from today, on the first Tuesday of November 2020, we the people of the United States will vote in the 59th Presidential election. The intervening year is likely to provide for plenty of dissonance and, for investors, plenty of distraction.
There is a Kipling poem that begins, “If you can keep your head when all about you are losing theirs…”, that makes our point. Start this countdown to the election with the insight that keeping your head when the predictable “losing theirs” happens will be part of our advantage in what we can already see as a complicated year.
As investors, we want to volunteer some preventive medicine to preempt the potential need for acute care for election-itis (or perhaps election-phobia). The main symptom of election-itis is a case of nerves that can cause one to make emotionally driven investment decisions based on reactions to political events. There is a long and undistinguished history of this phenomena and, heading into the year ahead, we think it could be constructive to revisit some foundational thinking about investor behavior and behavioral finance.
Our shorthand explanation has been: politics is the tail not the dog. Rational investors are better served focusing on the primary data and causes relevant to market results, rather than delving into lesser political elements. For instance, we pay close attention to public policy, which can be of great importance. Conversely, the day to day political tug-of-war is not public policy and is VERY volatile.
Short-term market swings – either up or down – that are grounded in feelings around political shifts are unlikely to be sustainable. We advocate making investment decisions based on an analysis of the facts related to the economic cycle, earnings, and business fundamentals.
Our goal is to focus on being data driven, rational investors who concentrate on long-term compounding and results. Attempting short-term tactical decision making, especially based on the wagging political tail, has not proven to be an effective strategy.
See it coming. Being a rational investor is likely to be defining over the next 365 days.
For Tealwood portfolio and market insights, join us
at one of our upcoming one-hour Private Strategy Briefings:
November 20, 2019 – Noon Luncheon – at Tealwood’s 19th Floor Conference Room
January 15, 2020 Featured Kick-off to the 2020 Investing Year Ahead – Offered at two different times:
Noon Luncheon – Tealwood’s Canadian Pacific Plaza Conference Room
4:00 with reception to follow – Tealwood’s Canadian Pacific Plaza Conference Room