“Should the S&P 500 record a positive return from July 31 to October 31, it signals the reelection of the party in power, while a decline suggests replacement. The S&P ended September slightly below its July close, so the election results are at the mercy of the market’s October performance.” — Bloomberg reporter Suzanne Woolley, writing on 9/30/16. She cited research from S&P Global Market Intelligence, explaining an indicator that has a more than 80% success track record over the past 18 presidential elections going back to 1944. At press time, the S&P 500 is down 1.0%, putting this indicator in Trump’s corner with a week to go. Read more.
“The most unsettling [result] would likely be a ‘Brexit’-type situation, where polls suggest a clear Clinton win, but we wake up and find Trump has won.” — Liz Ann Sonders, Charles Schwab Chief Investment Strategist, writing on 10/14/16, about the stock market’s likely reaction to the election. Read more.
“Mr. Market doesn’t care who you are voting for, doesn’t care very much who wins, isn’t choosing one candidate over another and isn’t especially concerned with politics.” — Barry Ritholtz, writing in Bloomberg View on 10/7/16. He said presidential elections aren’t typically important market-moving agents. Any research to the contrary, he noted, can be attributed to the idea that correlation is the same as causation. Read more.
Investing in a low-return world
“The most obvious way to improve the odds of success...is to increase your investment contributions; even small additional contributions can help bridge the gap between a low-return environment and a more normal one.” — Christine Benz, Morningstar Director of Personal Finance, in a 10/6/16 article about expectations for low stock-market returns over the next decade. Read more
Winning by not losing
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” — Berkshire Hathaway’s Charlie Munger, quoted in a Farnam Street blog post on the important difference between trying to not lose vs. trying to win. Read more
“When it comes to gauging risks in the world’s financial markets, these days investors are flying more or less blind. That’s because the once-dependable indicators traders relied on for decades to send out warnings are no longer up to the task. ” — From a 10/18/16 Bloomberg article about the declining reliability of the yield spread, swap spreads, and the VIX gauge to warn of trouble ahead. Read more.
Rock and a hard place
“It’s hard to know the difference between ‘Be patient’ and ‘Change your mind when the facts change.’ All worthwhile investments are cyclical, so capturing long-term returns requires patience through difficult times. Then again…about 40% of established public companies at some point lose most of their value and never recover. Blindly saying ‘Be patient’ isn’t safe in a world where most stuff eventually breaks for good.” — Morgan Housel writing why it’s often hard to know when to act when caught between two simple but opposite views. Mechanical rules, such as those in Upgrading, help you draw a line in the sand. Read more.
Matt Bell is Sound Mind Investing's Managing Editor. He is the author of five biblical money management books and the teacher or co-teacher on three video-based small group resources. His latest book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, will be published by Focus on the Family and its publishing partner, Tyndale House, in April of 2023. Matt has spoken at churches, universities, and conferences throughout the country and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.
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"SMI is about more than just the numbers."
SMI is about more than just the numbers, as important as those may be. A true heart for God comes through. As a young man with a young family trying to get on a good track financially, I appreciate the wisdom SMI offers.