It’s hard to be an American and not have your mind on the upcoming elections. Even if you’re not big on politics, the social and professional media channels alike are choked with commentary, and no doubt will remain so well into the fourth quarter.
So it’s no surprise that Dimensional’s third quarter Quarterly Market Review featured its report, “Presidential Elections and the Stock Market,” which we promptly shared with you when it was released in early October. If you missed reading it then, we encourage you to take a look at it now – and it might not hurt to revisit it as the November 8 day of reckoning arrives.
Dimensional’s charts, graphs and message about the election offer comforting, but realistic evidence that, come what may, the markets are likely to continue on as they have. Based on the evidence, the report concludes (and we agree): “Trying to make investment decisions based upon the outcome of presidential elections is unlikely to result in reliable excess returns for investors.”
Slide #14, “Global Diversification,” provides another key message. The markets have delivered strong returns over time, roughly in relation to how much market risk you must endure. But to fortify your endurance, diversification remains your best friend. Before, during and after the election, expect bumpy rides most quarters. This third quarter included a big surge in emerging markets, strong growth in domestic and global stocks and underperformance in real estate. Next quarter? That’s anybody’s guess. Long-term? The markets have endured. So should you.
SAGE Serendipity: About.com has a Political Humor Expert. His name is Daniel Kurtzman, and his job is to keep us up to date on the latest memes, late-night jokes, cartoons, and such daily. If you want to keep up with the quadrennial jokes that accompany an election year here’s a great source: The Latest in Political Humor.