Does the Upcoming Election Influence the Stock Market?

Let’s examine how the stock market has been affected by presidential elections. We’ll analyze past patterns, talk about how the market has responded to various political administrations, and provide helpful investing advice. Discover why it’s critical for investors to prioritize market fundamentals over political preconceptions.

In this episode, you will learn the following:

• How emotional reactions, particularly fear and stress, can cloud judgment and lead to hasty financial decisions.
• Importance of maintaining emotional detachment in high stress professions like investing, drawing parallels to the medical field’s rule against operating on family members.
• The benefits of training and preparedness in managing market uncertainties.
• How political debates and election outcomes can influence stock market perceptions and behaviors.
• Historical patterns and common misconceptions about the impact of political outcomes on market performance.
• Interplay between advancing technology, increasing energy demands and the market implications of different energy sources. 
• Environmental impact, cost effectiveness and potential of nuclear and renewable energy sources in the current financial landscape.
• How money supply, government expenditures and political regimes influence market trends and behavior.
• Historical spending patterns under different political regimes and their effects on market growth with a focus on large cap stocks linked to AI and sector specific volatility.
• Psychology behind smart investment choices, emphasizing the need for self awareness and logical decision making over emotional responses. 
• Market dynamics during election years reflecting on historical patterns and understanding sector specific volatility.

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TRANSCRIPT

(00:00) you become less rational when you’re when you’re really stressed and fear is a big one and markets tend to produce fear right stock markets can be very scary things are going down it generates a stress response and what do you do you can you you skip the logic Center sacrifice accuracy for Speed because of fear all right it is that time of the weekend welcome back to the true wealth radio show on this the best Tuesday you’ve had all week uh I’m your host Dave Little John back from Beyond yeah
(00:40) you were gone there for a minute uh yeah I think at least two shows I was gone three three yeah they never yeah they’re not going to let me that live that down either the best three shows that there there’s ever been and and I wasn’t part of it well yeah for June how about that the best three shows in June yeah fine but July whole new month a lot new content that we’re ready to start pushing out we are it’s time to launch um let’s go straight into the fun Matt did you watch the debate yeah so I have
(01:16) only seen Clips I haven’t watched it start to finish on the road no I actually need to watch the whole I can’t claim that I’ve seen the whole thing I I caught about 25% of it and then I had other stuff that was more pressing and so I stepped out but then I caught the highlight on the other 75% and um the highlights seemed to have been enough that the the fumbles were pretty significant big time um here’s why do I bring it up right well we keep getting asked the question you know what does this mean for the stock market right and
(01:50) we’ve been getting this question a lot and so I really think it’s worth unpacking you know um what if we get a republican in office what if we get a democrat in office how is that going to change things and I think a lot of people are under the impression that it’s going to have a radical change to the market and so we need to unpack that and I think one of the best ways to do that is to look to history right there’s been a lot of elections in our past what has happened not that it’s going to
(02:19) pertain to the future but it’s a decent indicator as to maybe what we can kind of expect right the as the joke goes history doesn’t repeat itself but it Rhymes ah there you go yeah so yeah it’s really not partisan today believe it or not um that’s not to say that we’re not inherently partisan I mean everybody brings their own opinions to this one um this is where in the interest of disclosure like I’m just a total wasp right white anglosaxon Protestant yep got you know three kids at home and a nuclear family and we’re
(02:53) still doing that stuff and uh you know for some people that makes me like hey r on and for other people are like oh my gosh you’re an oppressor and to those people I just say I don’t know pants down it’s ridiculous yeah like you know show me where the oppression occurs and well we don’t know your privilege or this that and the other go man we’re going to really stretch for that aren’t we like we’re going to do that because to me uh the idea that you’re what you put in has no bearing on the outcome is
(03:22) just nauseating mhm right in in this environment where we’re supposed to have uh freedom of opportunity and so forth it’s not to say uh here here’s in fact I’m going to make a comment about this for a sec right there was this video circulating around the internet at one point where they line a whole bunch of people up on a line on a field and they start saying you know if you have this in your life take two steps forward right but if you have this in your life take two steps backwards and they ask a
(03:48) series of questions and when they’re all done they say this is what your privilege looks like and I did a face palm as I thought about it for a second said you know there’s two things wrong with this I mean one what it illustrates is we start from different points right but it assumes we’re all running the same race and I think well that’s awfully presumptuous that we’re all trying to run to the same place the beauty of America is that we still enjoy a great deal of freedom to run where we’d like
(04:17) to right that’s a good point and so that just kind of sat with me because the ideal life for one person might just be I want to you know right we don’t share the same passion it’s like some people like look I I love doing this stuff on the radio here there’s some people that are mortified by it I mean they would not want to do this at all no I’ve talked to a lot of people saying hey would you like to join on the radio oh the thought of speaking to that many people just makes me yeah and I’m like I
(04:46) enjoy it yeah and so just those little things like we’re we’re not built the same and that is awesome right it’s great that we all have these different passions and different talents and you know that forms the society and it forms an economy and I think that some natural divisions of labor that are great but uh it it just frustrates me to to suggest that um it can be distilled down to like class identities as to whether or not somebody succeeds or not ah gez yeah let’s measure everyone the exact same
(05:18) way yeah so so anyway that’s just a little aside to this one but why because I guess when it comes to political debate you know people are going to make their assumptions and I’m like yeah it turns out I start on the conservative side of a lot of analysis find myself to the middle pretty quick a lot but not everything I do starts on the conservative side either right I tend to be fairly socially agnostic I don’t particularly like the government to be involved in social policy okay Ron Swanson yeah there’s a lot of things
(05:49) that are reflected there I think small government is the best government you know uh provided that it’s not hurting yourself or others around you and it’s not uh you know creating chaos that’s in Stark violation of our social contract and I think there’s some pliability there because not every social contract is right I also like giving I mean re in agreement with what you just said but I also like when we tend to give States more control than a federal like overreaching sweep where it’s like hey
(06:16) you know let the states figure out the the bulk majority of this stuff what do we need the federal government for uh defense right like regulation of basic Commerce you know standardized currency I mean there’s certain things that we like to have standardized across state lines no I’m in agreement that essentially the more localized the control the better um I I’m quite certain the needs of Roseburg Oregon where we’re broadcasting from look different than need the needs of La yep absolutely you know we have different
(06:44) topography we have different uh not just personality but I mean there just the demographics of the area it’s very different like we don’t have the population density we don’t have a lot of things that they have I think you’re setting a good stage though for the show where it’s like hey we’re just going to throw some facts out there and we’re going to talk about what has happened in the past and whether you lean left lean right or none of the above let’s just have an honest Frank conversation about
(07:09) the stock market and how that’s related to let me and I’m going to I’m going to summarize the show before we even get going right sure um here’s the dirty secret we’re going to talk a whole bunch about this if you’re looking for a cheat code that’s going to somehow unlock the market it ain’t happening nope right it’s not we we’re yet to discover a cheat code that unlocks this thing and guarant an outcome I’ve not seen it okay but I think there’s some some takeaways
(07:34) that we can we can extract today that give you sort of an indication of how things are trending and some things to consider when we’re looking at this but I don’t think we can say like well based on the debate uh the stock market’s going to do this no no that is such a not even for like based on the debate we can project the outcome of the election and based on the outcome we give a hint to the indan of the show or the summary of the show I think that we need to at the end of the day not let emotional behaviors in regards to
(08:10) elections Drive our decision- making right like at the end of the day we need to keep a good head on our shoulders and try and separate ourselves from our emotion because for most people we’re going to be emotional about how we feel politically and sometimes I think that can roll over into making bad financial decisions oh I I would say most of the time often times right uh you could probably summarize this really simply there’s um I’ve been listening to a book uh off and on it’s kind of a long one
(08:40) called thinking fast and slow I don’t recall the author’s name off the top of my head but really talks about the two different thinking systems that our mind has and it’s really important to understand I actually gave a TED talk about this years ago uh the idea that your conscious brain is only capable of handling so much at a time right you forget that when you’re standing a good portion of brain power is just helping you maintain balance but you never think about that it’s automated and that’s a system that is
(09:13) subconscious right below your conscious thoughts all of those things are being processed and handled but your conscious thoughts are juggling conversation and the things that are happening right now I mean if you’re if you listen for a second do you know what your left foot feels like tingly too much sugar Maybe now right but if you weren’t thinking about it until I said something that’s an example of how the system was running without you paying attention to right okay and why is it relevant well the two
(09:41) systems do different things okay um the also consider that the conscious system while tied to the subconscious system often times has to make decisions without complete data okay fight ORF flight responses okay if you have a fight ORF flight response I think three right it’s it’s uh freeze flight or fight okay do you tend to freeze or fight uh I tend to fight I feel like you were going to say that because of your story recently on your vacation about the mountain line walking through the campground like who experiences that
(10:20) like you’re just sitting there at a picnic table or something in a mountain line in of dark so you couldn’t see it much we were yeah it’s it’s for our listeners I I’ll share the story you up for this yeah this was not part of show prep by the way but it was a strange experience right and then we did then we pulled some data on it which made it even more interesting so uh we’re in we’re outside of Yosemite at a campground on vacation right and so the family’s there we’ve got our motor home
(10:49) all of my kids and my wife are actually in the motor home I’m out at by the campfire pit and I’m talking to the neighbor and I I take that back my youngest daughter was with the neighbor’s kids they’re playing a card game right next door they were like made friends and so I was talking with the neighbor nice guy right and we’re chitchatting and it’s coming out on about 10:00 and his wife had come out we were just also chatting a little bit and all of a sudden everybody gets real nervous the dogs are kind of starting to
(11:15) bark and um I hear the the neighbor say she his wife says to be like that’s a mountain lion and she just kind of grabs the kids and just ushers them into the trailer and then my kid goes okay and and yeah okay and so and she goes and I’m standing there with the this other fella I don’t see him but she’s like I just walked right by and so for whatever reason I reached down and there was like a long it’s not a stick it’s actually like a like a 2 by two board like like a like a stick it was a heavy duty stick
(11:52) like a baseball bat kind of thing it was partially burned on the end but it was you know 3 4T long and so I reached down and picked this thing up and sure enough right across from me and it’s probably 35 ft away this mountain lion walks up and I see it silhouette and it turns and stares at me for a second and I don’t have a panic response at all I look at this thing and think do you really want to tango well it was a this is the part that it shouldn’t when you talk about what is it a fight ORF flight response I should have like
(12:21) freaked out or have my heart accelerate instead I was like hm mountain lions you’re supposed to get big and make a lot of noise and that’s how you drive them away and I’m holding this stick and I thought to myself I need to go beat this cat right like it’s a you need to do what it’s not that I want to abuse animals right but I’m like we’re in a campground full of kids and stuff somebody better scare this thing away I’m the most reasonable guy to do it and I was just like I better approach this
(12:49) cat and it just kept walking and I went out looking for it and never saw it again W but you know I walked out kind of carrying my club like I’m a caveman or something so uh I don’t think that makes more intelligent by the way I think but it is interesting to see how we process this my logic Center was working with figh ORF flight saying You better drive this thing out of Camp it’s it would be interesting to kind of like parallel that too how does your mind work in regards to the market when things are really stressful and really
(13:17) going ay it’s like how does that fight or flight relate to the markets so super interesting we’re super not prepped for this but because I’ve done some research in the past let’s come back to this we’re running long first segment do me a favor let’s stick around we’ll grab a break when we come back I want to talk a little bit about the fight ORF flight response or what we’ll call the stress response and how it can adversely affect investment decisions let’s do that all right stick around we’ll be right back
(13:45) I’m Dave Little John and Matt Dixon and you got true wealth on news radio 939 FM and 1240 kqen all right I guess we’re back Matt hey um just reminder grab the podcast there’s going to be a gap to I just realized like we were like some our video Maybe for that segment but um cuz you can get the rest of the story about the mountain lion um the audio will be there yeah but uh the and the weird end of of the story so you know I’m out there looking for it but the dogs had gone berserk it it had left we did some
(14:15) research in office right and what we find like in the last 100 years there’s only been like 20 Mountain Li attacks it’s something really low really uncommon yeah um it it really or or like maybe it wasn’t that low like 100 attacks in the last 20 years total yeah it’s an extremely low incidence that almost always the mountain line you should be more terrified of being in a car accident way more I mean you’re probably more likely to have a shark attack and that’s like you’re more likely to be struck by lightning than be
(14:46) but by a shark I think like just crazy stats like that but whatever uh when when we you asked me this question I had a question for you I’m like you know you’ve got this fight ORF flight response and in your instance more often than not your initial reaction is the fight response but how does that you know kind of correlate to maybe Behavior regarding the stock market like you know for the person who has more of that fight response how does that kind of correlate to your behaviors sure and maybe we need to expand on the
(15:18) response just a little bit too not everything’s a fight or flight in the traditional sense right um what I tend to become is very very clinical under high stress okay okay and so a lot of the emotions that make me seem kind of um you know friendly or more engaging kind of disappear and I become a drill sergeant so you would have been a good surgeon possibly right I’m just thinking about the the examples I have are usually things like you know you’re driving on the freeway you hit black ice and you know do you freak out and start
(15:50) yanking the car around I I do not I get really really like dial super super focused everything goes into slow motion all the moves become very very sensitive so there’s very little overcorrection and such in that case um and and I have like actual thoughts about physics and so forth like oh you’re sliding well you need to make sure that you stay on the direction or the path that you’re already in until you gain traction because you’re not going to have adequate friction in order to establish
(16:19) grip in order to get course corrected I’m like thinking this while it’s happening right so I go like into this like super detailed problem solve it mode and then once it’s over the flood of adrenaline hits and then it’s like you know you become kind of a jelly mess afterwards but in the moment super hyper focused yeah so but not everybody has that response some people they really just like scream and lose it right and it just there’s a spectrum and you don’t necessarily know until you’ve
(16:48) experienced it mhm so I bet you’ve seen investors who are the type that just freak out wig out are like an emotional puddle and then people who are like we got to do something can you kind of talk about like a little bit of a comparison there yeah it’s funny too because you you look at the time Horizon too right some decisions have to be made in an instant yeah and those there’s not a whole lot of time to things so sometimes it’s just a reaction and this is where I would say our biological systems are
(17:21) designed for shortcuts right if you touch a hot stove you don’t think about pulling your hand back that’s too slow there’s an immediate reaction to to pull away from Pain and sometimes you can step into something else that hurts also which is not good but it’s a programmed response to get your hand off the hot stove as quickly as possible to minimize damage you’re sacrificing accuracy in the decision for Speed okay and so our system has a biology to do that to sacrifice accuracy for Speed the problem
(17:54) lies in slower paced decisions that happen under really high stress okay now I’m not a biologist but I stay at a high like a holiday and express right the hormone that’s generated when you’re under stress over time is something called cortisol right okay and long-term stress has lots of biological effects but in the intermediate term like when you’re under stress and you’re trying to make a decision it can become biologically improbable I’m going notice that term right improbable not impossible but
(18:28) improbable to use the logic function of your brain right because the cortisol in your system is causing you to the well the stress response is essentially keeping you in a fight or flight and you’re doing the best you can to maintain stability in an instable environment and long-term stress like that wears on the body but it makes decision- making very difficult right when you’re scared it’s hard to make good decisions right you become less rational when you’re when you’re really stressed and fear is a big
(19:01) one and markets tend to produce fear right stock markets can be very scary things are going down it generates a stress response and what do you do you can you you skip the logic Center sacrifice accuracy for Speed because of fear ah right that with investors can create all kinds of Havoc because like a panic selling moment an example Panic selling is is the example right I’m doing the opposite of what I should be doing because I can’t use the rational parts of my brain right now I just need resolution and this pain to
(19:37) stop okay that’s a challenge because often times the opportunities are in the highest stress okay now let me give you another example talked about this on the show before if you’ve been a long time listener you’ve heard this firefighters okay so Matt if you or I had a house on fire and we decided to grab the garden hose and run inside what happens well we’re probably not going to make it out of the house because we’re either going to get smoke inhalation and fall on the floor or the heat or flame
(20:12) is going to get us and we’re toast yes right probability of success extremely low despite what the movies would have you believe you can’t run in and save your pet or something like you die with them yep firefighter shows up and does the same thing what happens they’re going to most likely walk out just fine because they’ve got the suit to protect them from the flame they know at what temperature they can be in there for the you know a certain amount of time they’ve got a watch they’ve got people
(20:37) watching the fire from the outside they have an oxygen tank so they’re not breathing the smoke they have way more advantages than you do so and what you just described is they have a whole bunch of tools MH but you know what else they have training training yep that is huge because they can go into a high stress response environment still experience the same stress that the rest of us would but their training is able to take over and helps them they’ve trained to make the right decisions in that environment that is one of the huge
(21:11) differences yeah and I feel like that really translates over into our field of work right like you have seen the dot bubble you have seen the you know housing collapse in ‘ 08 you have seen covid you’ve seen a lot of these different pullbacks in the market and you know if we happen to get another one it’s probably not going to phase you the same way that someone who’s only seen it one time well and you know what I mean I think that’s true and to lay further into this illustration okay so Matt you don’t have as many
(21:45) years of experience however okay there’s another example let’s not talk about fires for M for for the moment let’s talk about surgeons there’s typically a rule that says a surgeon cannot operate on their own family members right why do you think that is you’re too emotionally involved in the process right yeah right your judgment gets compromised because you’re too close MH right and so there needs to be some clinical Detachment where Matthew with you may not have the same just I made it I call him Matt all
(22:20) the time even though like all of his stuff everywhere is Matthew right this makes it sound like I’m being all P you know patronizing here I’ll take it I’ll take it I so yeah when you you consider as a professional the advantage that you have is that you’re looking at this all of the time it’s not you don’t experience the same level of stress because you have this High degree of familiarity even though you haven’t been through the same cycles that I have you’ve studied them yeah right that’s true you have
(22:48) other teammates that you can turn to to check your thinking MH right and you are clinically detached true right and so it gives you the ability or or the higher probability of getting back into that logic decision Matrix as opposed to the fight ORF flight response yeah right even if you are stressed out in another area of your life this area that you are trained for in clinical in you can do really well in right right and so there in lies the challenge for I think all of our listeners out there and everybody
(23:23) that’s an investor is like especially the person who’s doing it themselves they only have themselves to listen to they don’t have another opinion and they are super personally invested because it’s your money right it’s it’s all of the things right if you if you lack lots of training and you are emotionally close to it then you are less likely to be objective in all the decisions yes that does not mean you can’t be right the personality comes into play for all of this and aptitude
(23:54) and skill level and so forth so there there’s a lot of things to consider in this one right you you’ll notice on this show rarely am I you’re going to hear me say you know what you guys better go out and hire a pro because you’re incompetent that’s a fear tactic sure I’m not interested in that right that’s that’s not what we do here we’re about educating on how to do this but you do need to know where the potential chinks in the armor are so that you can prep yourself properly right get better
(24:21) trained if you’re going to do this yourself right find ways to step back and make sure that the you know give yourself an opportunity to pump the brakes on decisions and try to bring logic back in as much as possible and not be emotionally reactive right right and so I think that’s the step so all of this Frame up now we can go back to our original question which is should you be afraid and fearful about well what happened after this um debate what what is the market got going to do now right and to me it’s a fun and interesting
(24:57) question because more questions were created than were answered yeah so but can we answer them maybe maybe maybe I think we’re going to take a stab at it okay as I look at the clock I realize we got to take another break first so stick around again we’re not here to throw rocks at any of the candidates today we’re just going to talk about now that everything’s up in the air what might the market be looking for I’m ready for it that and more stick around we’ll be back I’m Dave Littlejohn
(25:30) and Matt Dixon and you got true wealth on news radio 939 FM and 1240 kqen welcome back to the true wealth show you’re you’re getting tailed into this conversation we’re sorry um not sorry actually what you’re missing Matt was asking about nuclear energy yeah you we really talking about I mean it was kind of the well it talked about like our brain processing power and how little our brain uses and it’s like but look at how much AI still uses yeah like energy wise yeah and so it’s like well great if AI
(25:58) is going to change the world but it needs all this power where is it going to come from and then it’s like well should it be nuclear at some point and I think yes is my answer right but I’m like but the the politics behind that are so messy when it’s like nobody wants to deal with the leftovers of nuclear and it’s always not in my backyard kind of thing see well then then where MH yeah be interesting because the US is needing more and more and more energy all the time like California’s grid is
(26:30) like desperate for more energy they’re buying it from other places yeah and where is it going to come from I think there’s multiple parts of this I’m no expert in the energy component uh but there are a few things that just seem intuitive to me right one is we have this aging delivery infrastructure right so Powers delivered over lines above ground or underground and so forth and uh we don’t have a lot of better alternatives to that right now but what we can do is distribute where power is created so it has to be
(27:02) delivered over shorter distances and what that does is it reduces the burden of transfer around the grid and the loss of power during the transfer and by Distributing where the power is captured or created so like when you put solar on the roof of every house in California then you’re really generating a lot of electricity that way and it’s a distributed right back into it the what you’re do is load balancing the grid right rather than like creating the energy at a dam somewhere and then sending it 200 miles away you’re sending
(27:35) it 30t down a power cord storing in a battery until it gets used and so that what that does is it reduces the requirements on the grid to be able to move power around so that load balancing is useful yeah right and so that that’s part of extending the life of the existing infrastructure uh so I see some benefits to that but then you have to at the cost of producing solar and is there a net gain or not right I don’t think that’s a zero sum game right cuz while I’m know like I’m not really a
(28:07) hardcore environmental conspiracy that believes that the world’s ending tomorrow because of what we’re doing but I do think that when given the choice between do we put more carbon in the atmosphere or don’t we I don’t see a downside to reducing it right I don’t see a downside to reduce it like I don’t see a downside to keeping poison out of the air mhm so I’m okay with that and I don’t see a downside to renewable energy it’s just at some point it has to be cost effective it can’t cost five times more
(28:37) right for a non- discernable benefit right nobody’s going to pay five times more for the same thing if you can’t discern a benefit yeah and you can’t conjure a benefit that’s the thing like you can’t well there’s a benefit is there really oh know we maybe if we do the this sort of rationalization yeah that that whole energy is very very interesting yeah because boy it can wrap you around the axle too yeah yeah um but anyway I like I could say things like Tesla’s just a fun car to drive electric cars are super
(29:11) fast and that’s cool yeah the Instant Power from just wild is pretty sweet yeah if you want to drive a rocket ship cell phone that’s kind of what they are yeah um so you know you got to like technology and toys it’ll be interesting to see where the Battery Technology goes because we keep getting what it seems like more and more breakthroughs in advancing the batteries you know and if we can go away from lithium I mean or even just incorporate uh natural gases to combust with electricity that that’s really just a
(29:46) fascinating these two wacky well multiple thoughts are on batteries I guess this is where I like throw my ideas away so I can never like capture them and utilize them for anything good but whatever someone’s going to take this and monetize it um you you know the first is of course you want batteries that you can charge really rapidly right ideally you could use common available elements right so not Rare Earth stuff common elements and uh you know I understand that it’s about transferring electrons from one gradient to another
(30:15) and then capturing them as they move that’s kind of the idea of you know I think electrons move and that’s how you get electricity to power something right but it also occurred to me that you know you have a battery that you you use it gets down to a point where it can’t deliver enough current and then you stop using it for a while and it sort of heals a little bit like it it uh stores up a little bit of a charge that can use again so there’s a a bit of a capacitive nature to the battery at times and um I
(30:43) wonder if there isn’t um some kind of um catalytic style chemical reaction that would allow a battery that’s not being actively drawn on to essentially recharge itself you know and they’ve talked about um you know whether you have a a capacitor is different than a battery right like if you had a a high power source but you fill the capacitor drain it down and then you fill the capacitor back up it’s not the storage unit it’s a way to boost up the amount of amperage or the amount of voltage in
(31:14) that capacitor so it but the idea that you could have a a chemical process that included a catalyst Catalyst doesn’t get consumed in the reaction and and it allows the battery to essentially recharge itself if it’s not underload MH and so what you get is an extended life of battery and I don’t know the the science behind it I just know that you know a lot of these things start with a concept and then somebody gets like Well yeah if you did this and this and this so but you got to have the idea thrown
(31:39) out there so there you go yeah um the silly ideas that show up in my head yeah right Matt yeah we got to get back to home base on the show nuclear but this was all about the I think the question now I’m going to ask you so uh the the debate that we just saw between Trump and Biden was pretty weird right and I think the big shocker was that Biden had some significant stumbles that were beyond what was typical I mean he’s he’s had gas for his career right but this this looked pretty egregious well
(32:15) and that’s not us picking aside you look at any news Outlet no yeah I don’t I don’t think that’s partisan right now the entire conversation is Biden looked disoriented tired he wasn’t tracking well he wasn’t actually answering questions and so it brought up the concern is he fit for another four years and I think that’s a really reasonable question to ask and that’s you you really um you took where I was going with it to where I hope you would too which is let’s not I’m not throwing rock
(32:44) at Biden here but let’s just play out what the Market’s asking now the Market’s asking itself based on this how do I handicap particular things one thing that is now introduced is Will Biden be the eventual candidate mhm okay and so that’s a yes or no question right and then but if the so if the answer is yes then Will he win okay so there’s question kind of scenario one like and so playing into scenario one scenario one is he wins the election right correct okay scenario scenario two
(33:17) he loses the election and we’re assuming Trump wins right but scenario three and four and Infinity on Beyond is well I say let’s just go to scenario 3 and say someone else runs in his place and wins and Biden steps out or is replaced and candidate three wins right and then you say who’s the candidate what are the what are the ongoing policies that show up as a result and how does the market digest those right there are things that are still very difficult to handicap right now right and if you’re wondering
(33:50) where the heck we going with this we’re we’re going somewhere relevant right well because because baked into the data of this is the market seems to care less historically about who wins then whether or not it’s positively surprised let me give you a stat on that so kind of thinking along the lines of Market prediction versus reality right like you go back to 2016 when Trump won the election that was not predicted right like they it was the prediction was Trump would lose but he doesn’t he ends up winning and so everyone thought
(34:28) that the markets were going to have this sharp decline oh my gosh Trump won here goes the market uh reality the S&P ended up almost 12% that year right right and then you can even flip-flop that um you know we were scared back in 2020 that the election was going to be contested and everyone thought that the market you know would really be bothered by that uh no the S&P 500 Rose nearly 11% in 2 months following Biden’s Victory so maybe it doesn’t matter quite as much as you think that it would yeah my
(35:08) takeaway is that it’s less partisan than we think and it’s not even necessarily entirely about policy other than if I could develop a theme underneath it it’s really hard to trade this by the way the theme and I’m not saying it’s accurate okay right but the underlying theme that develops when you start to look at regimes so that’s that’s maybe a length of administration but it could it’s not just administrations like how long’s a block in power and what are the things that
(35:38) they’re advocating for and so you start oh and then I look at the clock and I realize everybody wants to know what I’m talking about like what’s the observation about regimes and where the market goes um ha I got something really good for you on that well I’m going to make you stick around for the next through this last we’ll come back to this here’s the hint right it has less to do with policy or less to do with partisanship than it has to do with parties related to it and it’s not political parties what do I
(36:16) mean stick around and I’ll tell you I’m Dave Little John and Matt Dixon at true wealth on news radio 939 FM and 1240 KQ in all right welcome back to the true well show Dave Little John and Matt Dixon and just in the last few minutes here we’ve been talking today about all kinds of stuff we talked about decision- making fight ORF flight and using uh not letting emotions Wag the Dog of our decisions right and now we’re on to do does the election matter to the stock market right and it really came out of
(36:41) the debate which left more questions and answers in terms of viability of candidates replacement of candidates popularity of candidates um and you know there’s still a lot of questions about uh what this election brings and what I wanted to share with all of our listeners is an observation I’ve had now I’ve been a financial advisor um since about 2000 I actually started the industry before that in Insurance in 99 so I’ve got I’m I’m like somewhere in my 25th year doing this so it’s not my
(37:15) first rodeo uh my observation is that markets tend to go up when money supply is increasing and government expenditures are increasing M okay markets tend to go up when there are surprises in the news that they didn’t expect that are positive positive surprises move markets quickly and the expansion of money supply moves markets slowly right which is why right now as you see the money supply Contracting with higher interest rates even though the markets are going higher the market air quote is not necessarily
(37:57) going higher what we have is the large cap section of the market in the S&P 500 the biggest stocks all closely related to artificial intelligence are expanding and then the rest of them are actually pretty flat and the rest of the underlying Market is flat to negative so we’re seeing like the S the the the Dow is up like 5 6% for the year and the S&P is up like 16 177% for the year right and most of that has contributed to Nvidia and google Microsoft Facebook the magnific 7even as we talk about has been
(38:30) magnificent and all of those stocks are Mega cap stocks that are heavily leveraged to artificial intelligence y I think that we’re seeing AI move a lot like we saw the dotcom’s move now the Dooms ended with a pretty abrupt repricing in 2000 right we saw the markets really slide for a couple years as things were revalued there will be a point at which we have Peak valued AI yeah and but what’s interesting is that AI is such a large portion of our major index in the S&P so I think it makes it look like the markets are doing
(39:05) disproportionately better right now and that’s more a circumstance of how the index is composed than a circumstance of our total economy in which case if we saw a contraction of the money supply we could start to see that pressure the markets haven’t seen it yet but we could yeah okay so uh you know look at where the money is flowing and growing and that tends to drive the markets over time but it’s the surprise news if we came out tomorrow with surprise we’re regulating the heck out of AI I got some
(39:35) stats that can back you up there oh hit so you know typically Democrats advocate for more increase in government spending right and Republicans are typically a little bit more you know leaning on that reducing the government spending lowering taxes right although I chuckle because neither of them it’s like we want we want to spend more and then somebody else says well we want to spend even more right like oh okay um but you know you start looking at it um the average annual spending growth rate actually backs that up since 1945 to
(40:07) 2020 uh Democrats have bumped it up about 5.4% um each year under their spending whereas Republicans in office tend to be about 3.2% okay so but but interestingly enough the markets the markets so under Democrat Presidents since 1945 that S&P has been up on average 10.8% whereas Republican presidents only about 5.
(40:34) 6% so it backs up your theory right someone comes in they’re a little bit uh more loose on their spending markets tend to appreciate that and you see a rise so it’s crazy too though because if you consider when I use the term regimes right going back to 1945 you know you’re post World War II right and you’re seeing that expansion and then you go into the 70s right the the the late ‘ 60s through the 70s and oil embargos and everything else and it’s a it’s a kind of a bizarre inflationary period Then
(41:08) you have the Reaganomics period of the 80s and then you have the um the kind of the the Middle East 1.0 during the 90s yeah and then you had the big dot com buildup in the late 9s the collapse of that the transition into real estate from.com that implodes in 2008 and then you saw the FED show up and we’ve had quantitative easing and the troubled asset relief program remember the tarp program of 08 was we looked it up 700 million or 700 billion rather which it’s still a billion is a lot of money but like comparatively speaking then we just
(41:44) started printing money all the way up through covid where we printed massive money and now we’re raising rates and have raised rates even though the long end of the yield curve is still lower so suggesting that this is temporary so it’s very interesting to see the dynamic of money creation and how equities have been benefited by that and oddly during election years you know the S&P has been positive during an election year almost a little over 7% returns during an election year however there has been
(42:14) more volatility sure you know in the months leading up to it but you know largely the areas that are the most you know kind of volatile and changing are more sector-based rather than the broad market right like there’s certain segments of the market that tend to move more during an election cycle typically technology and Healthcare but that’s because regulation policy you know is expected to come down the P oh we got a new president well what regulation are they going to change and and that’s and healthcare and
(42:46) Technology are the things that they’re big in our economy as a percentage too and so they get kicked around by policy change right yeah I mean I you know money does get created or destroyed I mean it can through the expansion or contraction of money supply that’s how fractional reserves work but um typically money moves we don’t destroy it that often but it tends to move around in the economy we we try not to destroy it because uh the system’s built on slow and steady inflation and when more money comes in things typically
(43:14) just correct right I mean and everything is right I I still maintain that like a Snickers candy bar should be 40 to 50 cents and it’s like a $150 that’s inflation right and so my kids they’ll never have a 40 to 50 Cent price point people that were older than me are like are you kidding it should have been 25 or five or whatever that’s just because the nature of our system is built on inflation and you would expect that to also kind of work its way through the markets too if a company was
(43:41) worth a hundred million maybe that company now is worth $125 million but it takes a while for it to recorrect yeah and plus you know if the company’s growing anyway not only it’s growing while inflating so um the the takeaway from all of this at the end of the day is that uh partisan is probably not the way that we need to worry about how the markets are going to behave the more important thing is buy assets that are appreciating and if they’re appreciating better than inflation that puts you in an improved position pat yourself on the
(44:10) back I think the number one thing for especially for the middle classes it doesn’t take as much as you think to participate in the markets and how about don’t get emotional and make bad decisions don’t get emotional don’t make bad decisions separate the wants from the needs and make sure that you are focusing on buying assets rather than buying liabilities like a financial counselor where they need to bounce