Season 3, Episode 10: Will the election F up my investment strategy?

How putting our money under the mattress may or may not be a good financial decision if the other guy wins (but mainly may not be)

The wrong guy* is gonna win so the economy is going to go to hell in a hand basket and the stock market will tank and we’ll need our savings in the form of a pile of five dollar bills so we can buy milk and tangerines, right? (* I was gonna say “person” but who am I kidding? It’s always an effing guy.)

Sara explains how people always freak out about presidential elections and threaten to cash out their investment accounts because of the inevitable apocalypse. And then the apocalypse doesn’t actually come, and surprise, surprise, the cold-hearted stock market is entirely indifferent to who we elect or defeat.

Caitlin tries to catch Sara with some gotcha questions about specific areas of the economy that must suffer when the other side wins…only to be schooled, again. This time with a chart that even a Caitlin can understand.

Here’s the Bespoke chart Sara refers to that shows what our investment accounts would look like if we only kept our money in the stock market when our person wins the presidency, and what it would look like if we just left it the fuck alone compounding its little (actually big) interest:

Chart provided by Bespoke Investment Group and posted with permission

So, listen to Sara explain why all this fear mongering is way off base, and how we can thoughtfully respond to women that aren’t on the verge of a financial breakthrough with our facts and charts.

We’re not falling for this alarmist bullshit! (But it still seems kind of counter-intuitive, right??)

Ask us your dumb investing and finance questions for Season 3 on our Ask Us page!

We have the social medias!! Here’s our Instagram and Facebook and LinkedIn.

This episode was edited by our co-producer Kelly West. Music by Bad Bad Hats and Devmo.

Transcript for Season 3, Episode 10: Will the election F up my investment strategy?

Caitlin [00:00:07] Welcome to women on the verge of a Financial Breakthrough, a podcast where we're figuring out finance. One dumb question at a time. I'm the dummy. Caitlin Meredith, a coach and mediator based in the Bay area.

Sara [00:00:20] And I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup and Facebook. Before we start, do you know a woman who might be on the verge of a financial breakthrough? Will you text her a link to our show? Also, if you can, please leave us a review. This helps other women on the verge find us, and we read all of them and they make us happy. Cry like this one from a listener who said, listen up youngsters, there is so much good information here. In years to come, you'll be thanking yourself if you pay attention to this stuff now. I feel like that alludes to time value of money. Thank you so much for leaving the review. Now let's get started.

Caitlin [00:01:09] Okay, Sara, we're going to have an election this year, 2024. And it really feels like, especially with this election. And I'm sure we felt this way whenever a year was the last of election 2020, that like really life as we know it could end or something and that the economy is going to be so affected by whatever happens with it, we're all going to drop out. I don't know, we're going to go to bunkers, other people are going to go into bunkers. So is this the one time I'm allowed to withdraw all of my money from my retirement accounts, put it under the mattress and just wait this out and then get back into the market later. Like, is a crash imminent? Pending election results?

Sara [00:01:56] I guess it depends on who wins. Who is? Your guy or the other guy either way. Yeah. I mean, this is definitely the topic that is top of mind for most investors right now. It's, we're doing this again. We're going through another election cycle. So it's really confusing to figure out, like, well, what should I do to get ready for this? Right. A lot of people are wondering if they should be buying something special. Selling something special, hunkering down, building a bunker, stockpiling gold. Yeah, all of all of that stuff. Right. And, you know, it's really weird, like, I look at data and charts that get sent out, you know, every four years on this topic. So, like, I know this sounds this sounds crazy, but the answer is to do nothing.

Caitlin [00:02:58] Oh my God, it doesn't sound crazy because that's what you say. No matter what I know.

Sara [00:03:02] Well, that's what I was hoping that was going to be, like more exciting. Like, you know what you should do? Nothing. But it's the same as it as it always is. Which seems really counterintuitive to most people, right? That this election that probably has an impact on a lot of people, the different policies that will be put in place depending on who wins. It feels like if your guy doesn't win, that the other guy is going to tank the economy. That's usually what I hear is should we sell everything if a certain person wins? The economy is going to tank, or they're going to purposefully tank the economy, or their policies are going to take the economy.

Caitlin [00:03:44] Or like the international markets will tank. Not that I'm heavily invested in international markets, but like the ripple effects of U.S. politics are such that it's not just our local economy, it's everywhere. Industries can fail. Immigration laws change. So much so that our industries can't find workers. Like it feels very economic.

Sara [00:04:11] Yeah, it's just not. Isn't that weird?

Caitlin [00:04:14] I think you need to go back to school.

Sara [00:04:16] I know, and I keep looking for someone to send me the chart that says otherwise. Because you can. You can. Look, I'm staring at a chart right this moment from, bespoke, which is this really great investment research firm. And they sent out a chart which can we include things like in our show notes. I mean, let's.

Caitlin [00:04:36] Go crazy season three. Anything's possible.

Sara [00:04:39] I have permission to use this slide. I emailed bespoke personally.

Caitlin [00:04:44] Let's do.

Sara [00:04:44] It. So we have permission to use this slide. And the top says don't get political. Letting political beliefs get in the way of buy and hold has been extremely costly to investors. And then here's the next part. Like it says, going back 70 years, $1,000 invested in the US stock market, only when a Republican is president would be worth $27,400 today. So that's pretty good, right?

Caitlin [00:05:10] 2001 to.

Sara [00:05:11] 24.

Caitlin [00:05:12] Yeah.

Sara [00:05:13] $1,000 invested. Only when a Democrat is president would be worth double that at $52,100.

Caitlin [00:05:22] All right. Okay.

Sara [00:05:24] I mean, that.

Caitlin [00:05:24] Sounds even better.

Sara [00:05:25] No one ever makes the argument to me that Democrats in office are good for business. Yet here we are. And then the last line is the best. But that $1,000 would be worth $1.43 million today for those who put politics aside and stayed invested, regardless of who's in charge in Washington, DC.

Caitlin [00:05:48] Oh my God.

Sara [00:05:49] Can you visualize that in your head? I'm looking at the chart, but I know you're not looking at it.

Caitlin [00:05:53] No, I mean, I get the difference between $1000 and $1 million. I don't need an exponential pie graph chart line graph to bring that home for me. I get my work here is done. So you don't. We don't even have to analyze it. It's just it doesn't have an effect to stay in the market. Just all of your clever ideas about how immigration and visas and women's health, etc., none of that matter. The cold, hard, greedy hands of the capitalists in charge.

Sara [00:06:36] It is because that's what it is, right? Like there's democracy, right? That you're casting your votes and a lot of the different policies and legislation that goes through affects you very personally. But then you have to think through like, well, what policies and legislation affects businesses ability to make money.

Caitlin [00:06:58] Right. So like I'm going to buy an iPhone no matter who's a president, I'm going to do my grocery shopping no matter who's president, like I am as an individual consumer participating in the economy. I'm going to use software if I need it.

Sara [00:07:13] So right, there isn't.

Caitlin [00:07:16] Enough consumer behavior that changes because of elections to make a difference.

Sara [00:07:20] Certainly consumer behavior, right. And consumer behavior is driven by whether or not you have a job, right, or whether or not you feel confident. So there is this confidence part of the stock market, right? When people get nervous or uncomfortable, they tend to take less risk. And then when people are more confident, or more secure or they tend to take more risk. So leading up to an election, you might have, you know, spikes or dips as people get more and more anxious about the election. But once the election is over and that. That unknown is known. The market tends to rebound pretty quickly because it just wants to know what you know, what it thinks. It wants to know what will happen, right? It doesn't matter what it is, just that an unknown thing turns into a known thing.

Caitlin [00:08:17] So is this yet another example how humans just don't get how the markets work? And so we're looking for normal explanations for a completely abnormal financial system.

Sara [00:08:32] Yeah. I mean, because I'm looking at this chart and I don't know how many times a million I've probably heard a million times about how, you know, Republicans are more focused on business and having having a focus on business and economics makes it better when they're in office.

Caitlin [00:08:50] And that people get richer because they're paying lower taxes.

Sara [00:08:54] Right? And yet, that has not shown up in the stock market at all. And so that just on it's just that one narrative that people convince themselves of or talk other people into or something that seems kind of intuitive when you look at the numbers, when you look at the data, there is no evidence to support that.

Caitlin [00:09:18] So what I would like us to do is to record your outgoing voicemail message for your clients that are calling to ask about whether to withdraw their investments because of the political environment. You'll have that like option for if you're considering withdrawing from your investment accounts because of the political environment. What would be your outgoing message like your soothing 1 to 2 sentence for all clients? This is your big opportunity.

Sara [00:09:44] Oh, I don't know if I have a soothing one. I mean, I'm planning on sending out. How can I how can I be soothing? Like, oh, like we stay the course no matter who's in office.

Caitlin [00:09:56] That that's the voice.

Sara [00:09:57] Red, blue, green, purple. We're all just people investing for the long run.

Caitlin [00:10:05] Long, good. Long run. Yeah. I've run. I fear that your newsletter recipients won't really get the vibe of that as well as we did through your voice. But I appreciate it. So yet another false alarm that dum dums like me when reading the newspaper headlines, they're like red herrings everywhere. And the message is don't relate anything you see in your actual life, or read in the papers with something that might happen in the stock market, none of it matters.

Sara [00:10:37] Well, I think like even further, it's like if someone comes up with a narrative about how something works. I mean, we live in a world where people collect data. So you should be able to put a chart and evidence next to a narrative, right, to say, well, this is when that thing was true. So this is like I think a very clear example of. A of storytelling, right? With an emotional hook. Yeah, that gets people right. But there's plenty of market data going back, you know, decades and decades and decades. There is no chart that supports the narrative. So when someone is telling you something with an emotional hook, right, you can you should be able to tell when someone is.

Caitlin [00:11:29] Yeah.

Sara [00:11:30] You know.

Caitlin [00:11:31] Like it's instilling fear in you or scarcity mindset or or greed. Oh. Agreed. Yes. And like an act fast. Sense to it.

Sara [00:11:43] Yes. Like I have the answer. This is the one thing you need to do now. You have to either look for yourself or ask that person be like, oh, that's really interesting. Can you send me a chart that shows that information, or can you show me when that has happened in the past? When people look at this chart, I mean, I showed it to us from the investing group meeting on Saturday at people's, like everyone in the room, everyone you know, attending virtually, like everyone's minds were blown, right? Like, because how could it be? And you could even see there even people in the meeting who were still saying like, well, but, you know, I still think, like, you know, that this party is better than that party as far as economics and stuff. And I'm like, this is these are just the numbers that I'm just showing in front of you.

Caitlin [00:12:30] What year did that thousand dollars go into the market?

Sara [00:12:33] It was when Eisenhower was inaugurated in 1953.

Caitlin [00:12:38] Oh, I was feeling bad that I hadn't invested. At the same time, I now realize I was not born yet. I'll just lay off. It's self-loathing and.

Sara [00:12:47] Regret. It's a lot of market or it's a lot of election cycles, right? Which is why it goes back so far.

Caitlin [00:12:52] Also just years like it's many, many, many, many years in the stock market. Yeah. So it got to do all its compounding. Okay. Well that's quick. Do I need election news to in any way influence my long term plan from building my financial future?

Sara [00:13:10] No.

Caitlin [00:13:11] Okay. The last little piece of this is then it really is scare tactics. Then when? Well, it's. I'm trying to think of industries like it's still could be true that certain industries suffer when there's an election because of new policies.

Sara [00:13:28] Oh, that's a really good point.

Caitlin [00:13:30] Why don't you develop it further? That's as far as I can go. That's really good.

Sara [00:13:40] Yes. So these charts, yeah, are in the aggregate right in at any point in time in the market or in the economy, you kind of have winners and losers based on. What's happening, right? Like, what are the policies that are put in place to reward some industries and punish and other industries? And that can be political. And so luckily, since you and I have been doing this podcast, we've been talking about a broadly diversified portfolio of stocks, right where you have all the industries in there. Some of them are doing well, some of them are not doing well. But I think to kind of build off of your question, one of the other, just one of the other questions. One of the women at the US Women's Investing Group had was or one of the things she pointed out was that in her industry, yeah, people felt like things were going bad. Right. Like whatever industry she was in, there were a lot of layoffs. And so she tends to be surrounded by just those people, right, in just that industry. So that colors how she sees the economy, right? Just like whatever political party you're a part of colors how you see the economy. Yeah. But that really like if you're investing like you need to pull out to the aggregate and leave room for like, you know, maybe there are parts of the economy or parts of the market that are actually doing really well. And I'm not in that industry. Right. But it exists. So looking at some of these numbers in the aggregate, instead of saying isolated in your own little world view, I think, well, I don't know. It probably won't make things easier. It'll probably make things more difficult because of that. What is it like? Cognitive dissonance.

Caitlin [00:15:20] Yeah, but everyone around me is worried about money. And yet the economy's doing amazing. Like that doesn't seem to fit together.

Sara [00:15:27] Right. But I mean, there are, I don't know, thousands and thousands of economists and researchers who are gathering data. And that data is out there for you to look at, to just kind of give you who are estimating.

Caitlin [00:15:40] That.

Sara [00:15:41] Well, and if you don't want to look at it, then just don't make investing decisions based on your little narrative. Right?

Caitlin [00:15:47] Okay. Right. And it wouldn't be an episode of women on the verge of a Financial breakthrough if we're not doing a plug for index funds. And so that are already S&P 500 already, you have the full market basket of a little bit of this and a little bit of that and a little bit of that. And when one of those companies fail, another one will come to take its place. So it would for people that are specialized investors, which of course we don't recommend, I don't know.

Sara [00:16:16] Very tricky.

Caitlin [00:16:17] But yes, it's very tricky because then you there could be I'm in imagining in my own mind that green energy companies might suffer from policies from a party that doesn't believe in climate change, for instance. And so if you're heavily invested in those areas and those companies stop getting government subsidies or something that's important for them, they might not thrive as much as they could and other political environment. But if you're have index funds, something is going to be thriving. And so you're taken up by the tide going high for everybody. Terrible metaphor.

Sara [00:16:58] Right? I mean, but if you don't specialize, I mean, because I just happened to know this, I was just looking at it today that green energy companies really suffered last year during a Democratic administration who believes in climate change because interest rates went up so high. But now it's harder for people to finance their solar panels, right? Yeah. So the whole political narrative just, like, fell apart, right? Like and so specializing or falling into that trap when investing is really, really common, it's just way more the world is way more complex than that. Then who's in office. Right. It's just there's way more factors at play.

Caitlin [00:17:38] We're just not smart enough to figure it all out.

Sara [00:17:42] No, just.

Caitlin [00:17:43] Leave it alone. Leave it alone.

Sara [00:17:45] You know, a dummy would have $1.43 million just.

Caitlin [00:17:52] Plugged in the market. Yeah, yeah. Okay. Well, I mean, you never cease to amaze me with this sort of counter-intuitive stuff, but it's also liberating because it means I don't have to apply any of my analytic mind to it. It just. That isn't true. Elections. Come elections go, my financial plan stays the same.

Sara [00:18:16] Yeah. Isn't that nice?

Caitlin [00:18:18] Oh, yeah, that's a relief. I mean, I have no idea what I would do if you said no. You have to do something different. Oh, my God, I can't. I can't do it. So I don't even know why bother asking? But okay, for any of you who were maybe curious about different strategies to employ in an election year. The answer is do not employ any of them.

Sara [00:18:41] Don't do it. Don't sell everything the day before the election. Don't sell. Sell everything the day after the election. I think it's like behind people saying I lost all of my. Money in the dotcom bubble or the financial crisis or, you know, during Covid, it's like the second most common investing mistake, which is I sold all of my stocks after my guy lost.

Caitlin [00:19:07] Yeah.

Sara [00:19:08] And never got back in.

Caitlin [00:19:12] Okay. We won't be that story now. We're staying in line. Let it.

Sara [00:19:17] Go. You should still vote.

Caitlin [00:19:20] Oh, right. Right.

Sara [00:19:22] Other things that are very important.

Caitlin [00:19:24] Yes. All right. Yeah. The voting working for causes you believe in investing in, causes you believe in, etc.. Okay. Thank you. SaraGlak.

Sara [00:19:35] Thanks, Caitlin.

Music transition by Bad Bad Hats

Sara Did you have a question about finance or investing? Send it to us in an email or voice memo on our website. Womenontheverge.com.

Caitlin Hey, we want our listeners to know that economic abuse can be subtle, but it's a serious form of control. Watch out for partners who limit your access to money. Sabotage your job or rack up debt in your name. If this sounds familiar, know you're not alone and there's help available. Please learn more at the hotline.org or call 800 799 safe.

Sara This episode was edited by our co-producer Kelly West, with music by Bad Bad Hats and Devmo.

 Music outro by Devmo

Devmo I know the first thing you notice is that I'm covered in gold, the flick of the wrist it could turn a hot bitch cold, to get what you want in life girl you gotta be bold. Now Imma die rich, and I know...

Sara This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.