Impact of Politics on Investments May Not Be as Great As You Think
The run-up to the 2024 election is an especially fraught time. The July 13 assassination attempt on Republican candidate Donald Trump and the July 21 announcement by Democratic President Joe Biden that he will not be pursuing a second term and is endorsing Kamala Harris for the Democratic nomination have added to the sense of uncertainty and unease felt by many, making this an election season unlike any in recent memory.
Even in the best of times, investors often get nervous about a presidential election, worrying about the reaction of financial markets to the outcome of the vote. This year’s events have heightened that unease for many. And while it is important to understand the race and to weigh the choices carefully, it is also important to remember that although the outcome of this election probably will affect the financial markets short-term, it is unlikely to have a long-term impact.
In part, that’s because financial markets react to a wide variety of things happening around the world, and the U.S. president, while probably the most powerful person in the world, can control only some of those things.
But mostly it is because financial markets are driven primarily by corporate profits. And successful corporations have learned over time how to thrive in virtually any political climate.
At Peachtree, we believe in building portfolios that give you the greatest chance to succeed over time, no matter which way the political winds blow. We focus on the stocks of large American companies that are established in their industries and have strong and experienced leadership. We look for companies with a consistently good return on investment and a long history of revenue and earnings growth. We prefer companies that have weathered many cycles of change – political, economic and social – and in so doing have avoided most of the market’s extreme highs and lows.
In addition, we choose dividend-paying stocks. A company needs a strong cash flow in order to pay dividends, which suggests the company has developed an effective business model. Dividends also can provide a shield against market volatility because all your return does not come from an increase in the stock price. Finally, choosing to reinvest your dividends can help to grow your portfolio significantly over time.
We encourage you to follow and participate in the democratic process as it plays out over the next several months. But at the same time, we caution you from letting that process play too great a part in your financial decisions.
We are happy to talk with you at any time about your investments, your concerns and your plans. Just give us a call. Garry can be reached at (404) 226-2728, and Courtney can be reached at (404) 403-9079.
Garry K. Schaefer
Courtney S. Deveau
July 30, 2024
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