O ne hundred years ago, Calvin Coolidge said that “the chief business of the American people is business,” and it’s still true today. By the time you read this, the Super Bowl will have been played and Major League Baseball teams will be in spring training. The Super Bowl has been played every year since 1967, including during the pandemic and various other crises. It is, of course, a great spectacle that Americans love, as witnessed by the huge television viewership and the ever-skyward march of ticket prices, now in the range of over $4,000 each.
It’s a game. And it’s big business. Depending on how you want to measure it, the game may generate as much as $1.3 billion in revenues and economic impact.
We don’t let things get in the way of that if we can help it. Elections, wars, recessions, and on and on—it doesn’t matter. The Super Bowl goes on, too.
When Democrats control the White House, Americans drink their favorite brand of coffee. When Republicans take control of the presidency, Americans don’t change that coffee. We still buy our favorite drinks, shop at our favorite stores, and watch our favorite streaming shows.
There’s an interesting disconnect between the Consumer Sentiment Index and the strength of the economy. Over the last four years, economists have puzzled over the fact that the economy was doing very well by almost all measures, while at the same time the Consumer Sentiment Index was quite low. What could explain this disconnect?
Probably the best explanation is the difference in how people feel about the economy based on their political party affiliation. When Republicans are in power, Democrats are negative about the economy.
When Democrats are in power, Republicans are even more negative about the economy than Democrats are when Republicans are in power.
But the truth is that no matter what party was in power over the decades, Americans still bought televisions and cars, ate at restaurants, and made other purchases. The greatest consumer market in the world didn’t alter even a tiny amount when the presidency changed its party. The only thing that changed was people’s stated optimism about the economy.
Interestingly, no matter what Americans say they feel about the economy, they still go out and spend pretty much the same amount of money. Actually, they spend more, because unless we are in a recession, consumer spending grows every year.
And most of the time that the economy is growing, the value of stocks is also growing.
In past columns I’ve written extensively about the better performance of both the economy and the stock market under Democratic administrations than under Republicans. Now that we have a Republican administration, you might be curious if I’d want to get out of the market. No. I don’t want to get out. Why not?
- While the past can inform us about what to expect, it’s a far-from-perfect system. This is especially so when we’re talking about such extremely complex systems as the economy and the stock market. In other words, just because things went a certain way in the past, it’s no guarantee they will in the future.
- More importantly, the last century has shown the stock market going up in at least seven of every ten years, no matter who’s in office.
Doing a little arithmetic, this means that on average, the market has gone up in almost three years of every presidential term. The real world is always a good bit messier than that, but what history tells us is that getting out of the market because you are worried about the impact of geopolitical events has not been a particularly effective investment strategy. Trying to invest based on your political opinion has, in the past, proven to be a fool’s errand. Remember that old saying about a fool and his money? Don’t be that fool.
Because no matter what I think about the new administration and its actions, I will still drink my favorite brand of coffee. I will still play golf, go on trips, take vitamins, and eat my favorite foods. And there are over 300 million Americans just like me.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to hal@getyourinsight.com. These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.