In this series I will be talking about your post-election investing strategy and some of the things that are likely to affect it. In this installment, I’ll be talking about the presidential election and the fear of missing out. 

Elections 

We’ve come off a contentious election. The transition is stalled and there is going to be a runoff in Georgia to decide control of the Senate. However, given all this uncertainty, we know what history tells us about U.S. presidential elections and the market. It’s natural for investors to look for a connection between who wins the White House or the Senate — and which way the market goes. As nearly a century of returns have shown, stocks have trended upward across administrations from both parties. 

Shareholders are investing in companies, not political parties. Companies focus on serving their customers and growing their businesses regardless of who is in the White House. U.S. presidents may have an impact on market returns, but so do hundreds, if not thousands, of other factors: the actions of foreign leaders, global pandemics, interest rate changes, rising and falling commodity prices, and technological advances, just to name a few. 

Fear Of Missing Out (FOMO)

FOMO is a powerful concept where one person feels jealousy if they think their neighbor is getting rich and they’re not. It leads to some really bad decisions.  Especially, given that your neighbor isn’t giving you the full picture of their situation — they tend to share the winning moments in their life including stock picks, but not the disappointments.

FOMO is emotional, specifically the emotion of fear. Following FOMO is really the same as chasing past returns. I think we would be hard-pressed to find anyone who’s only used past returns to make a fortune — by buying what did well yesterday.  As we like to say in the investment business, “ those who chase heat will get burned.”

At VIA IV, we separate emotions from investment decisions  Our stomach does not make good financial decisions. Emotional decisions (decisions of the heart) are fine for choices like choosing a life partner, but investment decisions should be calculated and made through a disciplined financial process, such as what we do for our clients at VIA IV.

In my next post I’ll chart out what I call the “flight plan.”

Jeff Holland | VIAIV