Note: Our political discussion is non-partisan and we analyze politics solely for market impact, as markets prefer no candidate, party or ideology. We believe political bias is a blinding behavioral investing error.
On October 19, Republican Donald Trump and Democrat Hillary Clinton faced off in the third and final presidential debate at the University of Nevada, Las Vegas. Moderated by Fox News’ Chris Wallace, the heated debate covered topics such as the Supreme Court, the economy, immigration, foreign policy and the national debt. As was the case in the first two debates, the candidates often veered off topic and questioned each other’s fitness to be president: Mrs. Clinton frequently brought up Mr. Trump’s recent allegations of personal misconduct, and Mr. Trump typically retorted with concerns about Mrs. Clinton’s email controversy.
With Election Day less than a month away, the candidates’ campaigns are in overdrive to persuade undecided voters. We expect media banter to similarly amplify as November 8th approaches, with pundits debating which candidate or party they believe will be best for the economy and stocks. While Republicans fear Clinton will do radical things, Democrats fear the same of Trump.
We encourage investors to watch what politicians actually do, rather than what they say—however entertaining or worrisome the talk may be. Candidates often promise big, sweeping changes when campaigning, but the realities of American politics constrain them once they become president, and few of their extraordinary proposals come to fruition. Polarizing campaign rhetoric certainly might increase volatility in the short term, but presidential power is more limited than often portrayed, and there are other, more powerful political factors that typically influence market movement over time.
As an investor, it’s important to understand how the election, and the events that follow, could affect your portfolio. We’ve analyzed the market implications of presidential elections historically and discovered some important trends you’ll want to pay attention to as Election Day nears.