Investment Insights Podcast: What a difference a week makes

Hart_Podcast_338x284Chris Hart, Senior Vice President

On this week’s podcast (recorded November 18, 2016), Chris is back discussing the swing in the markets that has ensued as a result of the election.

Quick hits:

  • By the end of the week, stocks posted gains of more than 5%, the largest weekly advance in two years.
  • However, we note that the rally has been massively rotational in nature rather than broad based.
  • Since the election, the dispersion of returns across has been high with equities moving higher and bonds selling off, domestic outperforming international, and small cap outperforming large caps
  • Much uncertainty remains ahead as the transition of U.S. leadership unfolds along with the strong probability of Fed action next month.

For the rest of Chris’s insight, click here to listen to the audio recording.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Trump’s free lunch: Avoiding a painful indigestion

Solomon-(2)Brad Solomon, Junior Investment Analyst

The aphorism “there is no free lunch” is one of those handy phrases used ad-nauseam in Economics courses. The seductively tasty platter currently set in front of investors is a lightning-fast reallocation of assets towards stocks that should “clearly” benefit from a Donald Trump presidency. Often, however, it pays to be a skeptic. I’m not critiquing the efficacy of the policies themselves towards promoting Americans’ well-being; I’m talking about the need to unhurriedly assess the second-level investment implications of policy and whether they have already been discounted into asset prices.

The ascendancy of the Trump administration and the degree to which President-Elect Trump will remain wedded to his campaign rhetoric have a number of moving parts. Now may be an opportune time to patiently exercise what Howard Marks of Oaktree Capital calls “second-level thinking”:

First-level thinking says, “It’s a good company; let’s buy the stock.” Second-level thinking says, “It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.”[1]

At Brinker Capital, we believe that second-level thinking is best nurtured by asking questions. Trump’s vision is to “transform America’s crumbling infrastructure into a golden opportunity for accelerated economic growth.” The number touted by is $550 billion, and a recent paper by senior Trump advisors, Wilbur Ross and Peter Navarro, calls for spurring $1 trillion in privately-financed infrastructure investment over the next decade through use of tax credits.[2]  Buy infrastructure seems to be the screamingly obvious investment implication, but here are a few less obvious questions:

Is our infrastructure actually “crumbling?”

The American Society of Civil Engineers (ASCE) gave America’s infrastructure a “D” in its 2013 report card.[3] But coming from a professional trade organization of civil engineers, that’s probably akin to asking the cows from the Chic-fil-A commercials whether they prefer beef or chicken. Policy analyst Mark Scribner calls this the “Great Infrastructure Myth” and notes that the number of structurally deficient bridges has been declining for over two decades while pavements have become smoother in aggregate.[4]  A recent piece by Deutsche Bank Research[5] argued that infrastructure spending in the U.S. is not, as commonly assumed, lacking:

  • When using infrastructure-specific price indices, the share of real government investment to output has been stable for much of the last three decades.
  • After taking into account compositional changes in private capex, business investment has also remained steady as a percent of output.

How much “leakage” is there to the transmission mechanism by which government spending boosts profits in the private sector?

Investors would be wise to examine the intended and realized consequences of President Obama’s $840 billion American Recovery and Reinvestment Act (ARRA) of February 2009, much of which was directed towards infrastructure. Michael Grabell’s 2012 piece “How Not to Revive an Economy” provides a sobering look at what led President Obama to admit that “there’s no such thing” as a shovel-ready project.[6]

Which subsectors are winners of increased public spending on infrastructure?

Infrastructure is a blanket term that encompasses a large array of systems: energy, transit, ports, aviation, levees, dams, schools, roads, inland waterways, public parks, rail, bridges, drinking water, and waste treatment. Twelve of the 16 sectors reviewed on the ASCE’s 2013 report card received a grade of “C” or worse. Narrowing in on two subsectors, what evidence exists that Trump will favor oil and gas over renewable energy, for instance, and will he possess the means to undo the renewable energy investment tax credit (ITC) that was recently renewed in December 2015?

Okay, you’ve decided to buy an infrastructure fund. What’s under the hood?

There are 18 open-end funds focused on infrastructure and 15 ETFs with “infrastructure” in their name. Let’s say that you’ve set your sights on one of the larger ETFs in the group focused on income-generating infrastructure equities. By sector, utilities comprise 49% of the ETF, not uncommon for other members of the group. Is that an allocation you’re comfortable making? The Committee for a Responsible Federal Budget projects that the Trump administration’s plans will increase the national debt by $5.3 trillion, to 105 percent of GDP by 2026.[7] Profligate deficits tend to have the effect of raising benchmark interest rates, and high-yielding utility stocks have traditionally been rate-sensitive instruments.

The investment world lends mythical status to the “contrarian” who takes out-of-favor positions. But standing out from the crowd is also possible simply through exercising patience and requiring a fully fleshed out view as precedent for making a judgment.

Our founder, Chuck Widger, provides timeless advice in his New York Times best selling book entitled, Personal Benchmark: Integrating Behavioral Finance and Investment Management, that helps advisors and investors stay the course in times such as these:

What this boils down to is that advisors must develop and oversee the execution of an investment strategy that anticipates the inevitable potholes and stays the course of efficiently compounding the investment portfolio to create purchasing power. This requires both the management of the investment portfolio and the management of investor behavior. Skilled, experienced advisors know that one of their most important responsibilities is to help investors avoid making emotional decisions when volatility is high or when markets are irrationally exuberant.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor. 

[1] Marks, Howard.  “It’s Not Easy.”  Oaktree Capital Management.  September 2015.

[2] Ross, Wilbur & Peter Navarro.  “Trump versus Clinton on Infrastructure.”  October 2016.  Specifically, the paper assumes projects are funded by debt and equity at a ratio of 5:1 and proposes to award a tax credit to the equity investor at 82% of the equity contribution or 13.7% of the project cost, and then tax the labor component of construction and the contractor’s pretax profits to bring the program towards revenue neutrality.

[3] American Society of Civil Engineers.  “2013 Report Card for America’s Infrastructure.”  March 2013.

[4] Scribner, Marc.  “The Great Infrastructure Myth.”  Competitive Enterprise Institute.  November 2016.

[5] Tierney, John.  “America’s Fiscal Consensus—A Bridge Too Far.”  Deutsche Bank Research.  October 2016.

[6] Grabell, Michael.  “How Not To Revive an Economy.”  The New York Times.  February 2012.

[7] Committee for a Responsible Budget.  “Promises and Price Tags: An Update.”  September 22, 2016.

Investment Insights Podcast: Potential impact of the election results on the financial markets

magnotta_headshot_2016Amy Magnotta, CFASenior Investment Manager, Brinker Capital

On this podcast (recorded November 16, 2016), Amy reviews the potential impact of the election results on the financial markets. Here are some quick hits before you have a listen:

  • Historically, an all-Republican government, as we will have in 2017, has been the best scenario for markets.
  • While the policies of a Trump administration are still unknown at this point, from his positions as a candidate we expect more expansionary fiscal policy, which is bullish for stocks but more bearish for bonds.
  • The biggest concern of a Trump presidency is the impact on trade as he does have the ability to impose tariffs by executive action.

Click here to listen to the full podcast.

Source: Brinker Capital. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. Indices are unmanaged and an investor cannot invest directly in an index. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Brinker Capital Inc., a Registered Investment Advisor.

Addressing post-election anxiety

Crosby_2015Dr. Daniel Crosby, Executive Director, The Center for Outcomes & Founder, Nocturne Capital

Global events, such as the intensely divided presidential election that we just lived through, are certain to generate some periods of market volatility of varying lengths in addition to a significant amount of stress. However, we urge financial advisors and investors to retain a few dos and don’ts to help manage post-election anxiety:

Don’t equate risk with volatility. Volatility does not equal risk. Risk is the likelihood that you will not have the money to live the life you want to live. Paper losses are not “risk” and neither are the gyrations of a volatile market. Long term investors have been rewarded by equity markets, but those rewards come at the price of bravery during periods of short-term uncertainty.

Do know your history. Despite what political pundits and TV commentators would have you believe, this is not an unusually scary time to be alive. The economy continues to grow (slowly) and most quality of life statistics (crime, drug use, teen pregnancy) have been declining for years. Markets have always climbed a wall of worry, rewarding those who stay the course and punishing those who succumb to fear.

Don’t give in to action bias. At most times and in most situations, increased effort leads to improved outcomes. Investing is that rare world where doing less actually gets you more.

Do take responsibility. Most investors are likely to tell you that timing and returns are the biggest drivers of financial performance, but research tells another story. Research suggests that you are the best friend and the worst enemy of your own portfolio. Over the last 20 years, the market has returned roughly 8.25% per annum, but the average retail investor has kept just over 4% of those gains because of poor investment behavior.1 At times when market moves can feel haphazard, it helps to remember who is really in charge.

Don’t focus on the minute to minute. If you are investing in the stock market you have to think long-term. As mentioned above, you can avoid action bias by not checking your portfolio status all day every day, especially during times of higher volatility. Limited looking leads to increased feelings of security and improved decision-making.

Do work with a professional. Odds are that when you chose your financial advisor, you selected him or her because of their academic pedigree, years of experience or a sound investment philosophy. Ironically, what you may have overlooked is the largest value he or she adds—managing your behavior. Studies put the value added from working with an advisor at 2 to 3% per year. Compound that effect over a lifetime, and the power of financial advice quickly becomes evident.

Source: (1) Dalbar, Inc. Quantitative Analysis of Investor Behavior. Boston: Dalbar, 2015.

Views expressed are those of Brinker Capital, Inc. and are for informational/educational purposes.  Opinions and research referring to future actions or events, such as the future financial performance of certain asset classes, indexes or market segments, are based on the current expectations and projections about future events provided by various sources, including Brinker Capital’s Investment Management Group. Information contained within may be subject to change. Diversification does not assure a profit not guarantee against a loss.

Being right for the wrong reasons

Andy RosenbergerAndrew Rosenberger, CFA, Senior Investment Manager

Investors betting on a Hillary win should be grinning ear-to-ear with the outcome of the election. Picture this for one moment. Imagine if I had told you last week who would win the election – but nothing else. Odds are, particularly after listening to the “experts” that you would have sold everything. Maybe if you’re the type who likes to speculate, you would have also used those cash proceeds to short the market, buy some VIX, or perhaps buy long-term Treasuries. After all, the standard meme was Trump = Bad for Markets, Clinton = Good for Markets. Good thing that crystal balls don’t exist. It’s a classic case of being right for the wrong reason. Or, taking the other side of the coin, being wrong for the right reason. As we all digest the outcome of events and try to comprehend what this all means, here are a few ruminations that come to mind:

  • Event-driven investing is REALLY hard. Event-driven investing is the idea of speculating on the outcome of a specific event. It sounds easy. But think about all the factors that go into it. You have to be right on calling the outcome. You have to be right on how the market reacts to that outcome. You have to know how much is already discounted into the market already. You have to have better information than everyone else. You have to structure the trade in such a way that it’s profitable. Like many things in life and investing, it sounds easier than it is.
  • Income relative to duration matters. In one single day, over a year and a half worth of income was wiped out for anyone investing in long term Treasuries. Prior to the election, the 30 year bond was yielding approximately 2.6%. The Wednesday after the election, the Barclays Long Term Treasury Index was down -4.14%. So now investors will have to wait over a year for the income generated on their bonds to make up their losses. Or, maybe they could try out some event-driven investing tactics mentioned above.
  • Volatility is dynamic. When regimes change, low volatility may suddenly be high volatility. It seems like a no-brainer. You can outperform the market with less risk by simply investing in stocks with lower volatility. Forget that it’s the topic du jour. Forget that there are immense amounts of money flowing into this group of stocks. Forget that valuations for these types of stocks have never been higher. It’s worked in the past. Well, until it doesn’t. I acknowledge it’s only one day. But yesterday’s dramatic underperformance of low volatility reemphasizes the point that there’s more to investing than simply investing in what worked historically.
  • Consensus is usually right…until it isn’t. Unlike low volatility stocks, just a few months ago everyone hated financial and healthcare stocks. After all, the yield curve was going to stay flat forever hampering banks and insurance company’s ability to generate returns. Separately, politicians were going to destroy the profitability of pharmaceutical companies by reversing sky-high drug prices. Bad fundamentals. Check. Bad technicals. Check. Market experts agree with you. Check. Unfortunately, when these views reverse, as we’ve seen as of late, they do so extraordinarily fast.
  • In statistics, sample sizes do not represent the overall population. How is it that in an era of big data and interconnectivity that our methods for predicting elections have gotten worse, not better? Certainly the migration away from landline phones and the shy Trump voter effect were both major factors. But anytime we talk about polling, we have to remember that we’re taking small samples of a very large population. I, for one, have NEVER been asked by a polling authority who I’m voting for. With over 119 million voters this election, I would imagine there are quite a few others who weren’t part of the sample size either. Statistics matter but so too does the means with which they are applied.
  • Politics can be very emotional for individuals. Particularly within investing, emotion and outperformance rarely coincide with one another. Investing is hard enough as it is. Billions of dollars of research has been dedicated to the art and science of getting a competitive advantage over other investors. And most haven’t been very successful.

The bottom line is that investors should focus on the long-term outcome knowing that over time, Democrat or Republican, 2% growth or 4% growth, Fed rate hike or no rate hike, that their investments will work for them in the long-term.

Brinker Capital understands that investing for the long-term can be daunting, especially during a time like this but we are focused on providing multi-asset class investment solutions that help investors manage the emotions of investing to achieve their unique financial goals.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor. 

Investing involves risk, including risk of loss. Diversification does not ensure a profit or guarantee against loss. Past Performance is no guarantee of future results. 

Where will you be when the dust settles?

Noreen D. BeamanNoreen D. Beaman, Chief Executive Officer

Since Donald Trump has been elected as the 45th President of the United States, the question we hear repeated most often is “what happens now?” While the immediate focus will be outlining transition of power plans, political appointments and the first 100 days of the Trump presidency, we’d be hard-pressed to find any expert who believes the uncertainty will end then.

Trump campaigned on a platform calling for sweeping change and dramatic deviations from the Obama administration. He wants to overhaul immigration policies, health coverage, taxation, and trade policies, all of which will have significant economic implications. His policies have yet to be clearly defined and we’ll have to wait to see if those policies will meet Congress and the Courts’ approval. There is also much speculation on who will be named to head the Treasury and whether he will follow through on his intention to replace Janet Yellen as Federal Reserve Chair. While these and many other economic dust particles swirl in the air, one thing we know for sure: the post-election uncertainties will create market volatility.

Even the savviest investor or most skilled asset manager cannot predict or control where the markets will land when the dust settles. So, instead of trying to glean actionable insights from uncertainty, we urge investors to focus on matters within control, such as:

  • An understanding that volatility is part of investing. In a recent blog, Dr. Daniel Crosby explained the impact elections have had on previous markets. It is worth re-reading and repeating that election cycles are like any other market cycles. Trends and patterns exist which may allow some securities and asset classes to outperform others. In light of the number and weight of the unknowns associated with a Trump presidency, the patterns of previous election cycles may bear little (if any) relevance to our experiences and decisions today. To put the volatility in perspective, try to repeat the lyrics of the famous Shirelle’s song, “Mama said there’d be days like this.” Volatility is part of investing and should not cause you to question your overall investment strategy. However, investors must seek to reduce volatility in their portfolio while maintaining the opportunity for appreciation.
  • Diversification can bring peace of mind. In addition to the economic benefits of investing broadly in a variety of asset classes, there are emotional gains to be made as well. When your portfolio spans asset classes, geographic regions, business sectors and investment styles, you know that while some conditions may be negative for one sector, they could be positive for others. You become less concerned about the performance of a particular asset class and focus more on how your total-return performance impacts your personal goals and benchmarks.
  • Your reliance on a competent advisor. Studies have shown that the greatest value provided by a financial advisor is behavioral coaching. It is in times of volatility and uncertainty that advisors earn their keep, so don’t be afraid to seek assurances and direction from your advisor.
  • A long-term perspective. Investing for the long-term can be daunting, so it may be helpful to remind yourself that it pays to wait. The worst return of any 25-year period was 5.9% annualized1. Time is on your side. As Crosby cautions, “Markets always have and always will climb a wall of worry, rewarding those who stay the course and punishing those who succumb to fear.”
  • Your goals are your benchmark. You have the power to control your actions, follow a plan, and make investment decisions on merit and not emotions. As John Coyne’s blog mentioned earlier in the week, it is important that you avoid emotions that could wreak havoc on a lifetime of careful planning. The degree with which you can maintain composure and stick with the plan put in place by your advisor is the single biggest predictor of where you will stand relative to your long-term financial goals when the dust settles.

Brinker Capital understands that investing for the long-term can be daunting, especially during a time like this but we are focused on providing multi-asset class investment solutions that help investors manage the emotions of investing to achieve their unique financial goals.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor. 

Investing involves risk, including risk of loss. Diversification does not ensure a profit or guarantee against loss. Past Performance is no guarantee of future results. 

Extra! Extra! The sky isn’t falling!

Coyne_HeadshotJohn Coyne, Vice Chairman

Growing up in an extended family passionate about politics, I have been watching elections closely since 1968. It seemed that every four years if “our guy (now gal as well)” didn’t win; go get Marlon Brando and remake the movie Apocalypse Now. The world as we know it was over, the economy would collapse and…life went on.

Most importantly, let’s first remember that the fear and anger that is driving these apocalyptic visions are being created by the media’s desire to sell advertising! Now I am the first to admit that there are characteristics to this election that are different in many ways than we have seen in the past and they center on the historically high unfavorable ratings of both presidential candidates. Nevertheless, we have not become the most envied democracy in the world by accident. Regardless of the rhetoric, both parties will accept the outcome and we will have a new President of the United States and a new congress in January.  Will they be as ineffective as some believe they have been in the past? Maybe. What is for sure is that our lives will continue, people will retire, get married, divorced, change jobs, fight illness and move forward. And they will need to invest in order to deal with all the mundane components that make up our hopes, dreams and anxieties.

Our friend Dan Clifton at Strategas Research Partners has been providing us with some of the most outstanding “in the moment” political and market analysis for the past 18 months. He has been doing this with an eye towards providing us with the sectors of the economy that will be impacted by the makeup of a government whether all Democrat, all Republican, or a mix. He has deftly pointed out the potential winners and losers by sectors and asset classes and provided historical context to demonstrate that the presumed wisdom that says we do better with this party or that is never always the case and often is the exact opposite of the believers assumption. He also notes that active investment managers understand this.

Chuck Widger, Brinker Capital’s Founder and Executive Chairman, has been educating advisors and investors throughout his career on the idea that emotions can wreak havoc on a lifetime of careful planning. He uses a bucket approach to categorizing assets that you could consider adopting in light of the election results. Are your safety assets going to remain that way? Highly probable. Are your income assets going to continue to work? The Fed has more influence than the President of the United States, but much of these investments are already locked in. It is more important that you have a good manager going forward than worry who the next Speaker of the House will be. What about your accumulation bucket? Your long-term money will outlast this incoming administration and probably many beyond it. Regardless of who is elected, there will be times of turmoil and unbridled enthusiasm. The only thing that is predictable is that in the proper hands your investments will compound over time.

So put on your seatbelt and get ready for a nasty, scary ride for the next few days…but leave the portfolio alone.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Fun Facts on The Election & The Stock Market…and Why None of Them Matter

Crosby_2015Dr. Daniel Crosby, Executive Director, The Center for Outcomes & Founder, Nocturne Capital

With less than one month remaining until the election, the already frenzied political coverage is sure to become even more fevered in the coming days. While each presidential election is unpredictable, it seems certain that this one is destined for the history books. For all of their sophistication, are there any political pundits that correctly predicted the rise of Bernie Sanders or that Donald Trump would emerge from a pack of 16 more politically experienced Republicans?

Adding to the confusion is that recent popular votes of all stripes—from Brexit to the Colombian peace deal—have not gone the way pollsters predicted. In the face of all of this uncertainty it is natural to wonder, “could the U.S. be the next surprise?” And a natural follow-on question is, “What does all of this mean for my money?” To begin to answer these questions, let’s look at some historical trends around U.S. elections and the stock market.

Incumbent vs. Challenger

Most considerations of political impact examine how potential candidates might influence the market, but let’s begin our study by flipping that on its head and ask, “How might the market help determine who wins the election?” As you might expect, incumbent parties are helped enormously by a rising market and challengers tend to be swept into power by a poor market.

washington_wallstreetSince 1928, 14 of the 22 presidential elections saw a rise in the broad market in the three months leading up to the big vote. In all but two of those instances, the incumbent party stayed in their comfy digs on Pennsylvania Avenue. But what of the eight instances where the market was down in the run up to the election? All but one of those more bearish periods saw the incumbent ousted from power.

This phenomenon was seen most recently in the failed reelection campaigns of George H.W. Bush (1992) and Jimmy Carter (1980). Bill Clinton, sensing the natural tendency of hard economic times to bring about change chided the senior Bush with his now famous “It’s the economy, stupid” line. The date to watch for this particular metric in this election cycle is August 1, at which time the S&P 500 closed at 2,170.84.

Democrats versus Republicans

Inasmuch as Republicans are broadly perceived as the more pro-business of the two parties, it may come as a surprise that the stock market has performed considerably better under Democratic than Republican presidents. In fact, since 1945 the average annual gain under a Democratic president is 9.7%, easily besting the average gain of 6.7% on the Republican’s watch.

But a closer look at the statistics tells a more nuanced story as, to borrow a Dickensian turn of phrase, Republicans have presided over both the best of times and the worst of times. The market’s most successful run occurred under Republican Gerald Ford—a whopping 18.6% annualized. However, the elephants also own the only two losing records in modern (post-1945) market history, with George W. Bush (-4.6% annualized) and Richard Nixon (-5.1% annualized) both overseeing periods of extended bearishness.

electionThe Election Cycle

Having now examined the market’s ability to predict the winner of the election and the impact of parties on performance, let’s look at the influence of the presidential cycle on market returns.

Since 1833, the market has typically produced the best returns in the year preceding an election, averaging 10.4% annualized. Election years themselves have tended to be good as well, with average returns at right around 6%. The worst years in the election cycle have been the first and second years of a president’s term, averaging 2.5% and 4.2% respectively. The conventional logic has been that familiarity breeds comfort and that the uncertainty surrounding the economic policies of a new leader have driven low returns early in the cycle.

Why None of This Matters

Having gone to some pain to research the relationship between the election and the market, let me now suggest that none of what you have read above matters. None of it. Our desire to look for signal in the unending noise surrounding political campaigns is a waste of time at best and can be dangerous to our financial well-being at worst. The government produces data on 45,000 pieces of economic each year and when they are laid on top of the mountain of data collected by political scientists, correlations emerge and most of them are spurious. To quote political pollster Nate Silver, “The temptation that some economists succumb to is to put all this data into a blender and claim that the resulting gruel is haute cuisine.” To make this point more concretely, consider some of the following:

  • Since 1928, election years like this one without an incumbent running for reelection have been some of the worst on record, clocking a -2.8% annualized return. Had you been aware of and acted on this information, you would missed the 5.37% gain for the large cap index year to date.
  • As discussed above, the market tends to gain 6% in election years. Great, but small comfort to those who lost 34% in 2008, an election year. It has been joked that a six-foot man can easily drown in a river that is three feet deep on average (since many parts of the river might be much deeper). The same can certainly be said of market returns where long-term averages tend to mask the more dramatic volatility underneath. The performance of the market is more attributable to economic conditions than superior policies. Democratic Presidents Roosevelt and Obama both inherited markets broken by the Great Depression and Great Recession respectively. While both deserve credit for guiding the nation during difficult times, they are also the beneficiaries of a tendency for stock prices to mean-revert and bounce back from dramatic lows. Bulls and bears may have less to do with donkeys and elephants than the statistics might suggest.
  • Finally, consider the research suggesting that the first year of a President’s term leads to the most paltry returns. Had you acted on this knowledge, you would have missed the 23.45% rise in the market in Obama’s first year in office and the double-digit advance in the first year of Bill Clinton’s presidency. By definition, averages are generalities that are not true of any specific situation and relying on them can cause deviation from an otherwise sound financial plan.

Election years introduce volatility and uncertainty into financial markets that leave investors and advisors alike searching for a calm port in a wild political storm. But in our efforts to make sense of the political and economic landscape, we run a real risk of finding connections where none exist. In 2016, one of America’s most powerful political dynasties was nearly upended by an independent and self-proclaimed democratic socialist. The Republican Party is now helmed by a reality television star who has never held office. The Cubs are in the playoffs.

At uncertain times like this, investors must return to what Jason Zweig refers to as “controlling the controllable.” The outcome of the election and the accompanying market reaction are very much unknowable. What remains very much in your control are your ability to diversify across multiple asset classes, maintain a long-term focus and work closely with a competent advisor to manage your own behavior. I don’t know who will win the White House and neither do you, but I know with some certainty that patient investors adhering to first principles will always come out ahead.


The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.