With the 2024 Presidential election just around the corner, it is more important than ever to equip ourselves with the knowledge and mindset necessary to weather market volatility and make informed financial decisions.
In today’s episode of Retire in Texas, PAX Financial Group CEO and Co-Founder, Darryl Lyons, breaks down everything you need to be aware of with regards to the upcoming election, and its potential impact on your finances. By understanding the implications of political events on the economy and markets, staying focused on long-term goals, and avoiding emotional reactions to short-term fluctuations, investors can navigate uncertain times with confidence and resilience.
Today’s show highlights include:
- An outline of key dates in the election process, including primaries, debates, and Election Day, to help you stay informed and prepared.
- A discussion of potential outcomes of the elections, including various combinations of party control in the presidency, House, and Senate, and how these scenarios may impact markets.
- Addressing top economic and non-economic issues identified in a recent Gallup poll, focusing on the federal budget and debt, and the different approaches of Democrats and Republicans regarding taxation and spending.
- Despite political volatility, why confidence in the long-term resilience of the stock market should be considered.
If you enjoyed today’s episode, make sure to comment and share it with a friend or family member!
Trending Conversations- 2024 Election Presentation
Transcript
Hey, this is Darryl Lyons, CEO and co-founder of PAX Financial Group. Thanks for tuning in to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. And so today we’re going to talk elections. You know, investing is really simple, but it’s not easy.
And so, this is going to be a difficult year because there’s going to be a lot of noise and emotion. So, I want you to get in front of it and I’m going to give you some information that I think will equip you to be in front of the noise. Now, just to make sure we’re all on the same page, the primaries and the convention end in August of this year, right?
When you’re just exhausted of the Texas heat, that’s when the primaries end. Then the debates start. The debates, the presidential debates, are in September and in October. Those are 90 minutes each. The first debate is September 16th. That’s a Monday and that will be at Texas State in San Marcus. Okay. Follow the time horizon so far, timeline, so far.
Election Day is November 5th. That’s a Tuesday and so, November 6th is a Wednesday. So if you need to take Wednesday off, November 6th off now, I’m giving you a little bit of runway to do that.
Interesting side note, 1968. Any guesses who won that election? President Nixon defeated Hubert Humphrey and if you look in my office, I’ve got some memorabilia from Hubert Humphrey because we had some family that had a business relationship with him. So, for what it’s worth, and don’t judge me, I just have it. Okay.
Inauguration Day is January 20th. Okay. Now we have the election, of course. But make sure that you and I know you won’t forget, but this is not a popular vote. It’s the Electoral College. So, you’ll need to pay attention to Georgia, Arizona, Wisconsin, Pennsylvania, North Carolina, Nevada, and Florida. Those are the states that are most important.
We also have to remember, we have Congress that we’re electing. A third of the Senate is up for election and all 435 seats in the House are up for reelection. So, what are the potential outcomes? You could get a Democrat President and a Republican House, or you can get a Republican President, Democrat House. Some combination of the senates. You get straight line, all Democrats, straight line, all Republicans.
Historically, what’s the best for the stock market? What’s the best combination? It’s a mixed bag. Whenever you have a Democrat President, Republican Congress, or vice versa, you get this kind of this stagnation. They have a hard time getting in the way of business. That’s the best.
So, am I rooting for a gridlock type of environment? I don’t know yet. But I’ll tell you this, getting them stuck, I want to call them clowns. That’s not nice. Getting these elected officials stuck fighting against each other is really good for business because then they don’t get in the way, and they don’t get any regulations that stop business.
But just so you know, that’s the best historically stock market environment. So, the Gallop Poll did a study September 30th, 2023. Top three economic issues, Top three economic issues in this survey. The economy in general, high costs, cost of living or inflation. And three, the federal budget, the debt.
Top three non-economic issues in this survey. Number one, government and poor leadership. Number two, unifying the country. And number three, Democracy. So, let’s talk about one of those, and that’s the federal budget and the debt, and this is really one of the most important points and issues of our generation. The Democrats, generally speaking, tax the rich and now it’s not phrased that way. It’s fair share. It’s phrased other ways. But tax the rich.
If you have a concern about the way I express that, you can listen to the prior show, and I articulate what I mean by that phraseology. I’m not meaning it in a derogatory way. I’m addressing the “tax the rich” phrase, as an intellectually dishonest approach that needs to be coupled with fiscal spending, discipline and responsibility.
And the Republicans may have a tax the rich, but they also talk about cutting spending. Historically hasn’t had a very good track record. Neither party has had a good track record of cutting spending. In fact, if you look in the history of presidents, Reagan didn’t exactly run a surplus. Bush didn’t run a surplus. Obama didn’t. JFK didn’t.
The only one that really did was Slick Willie for a few years. So, we have a presidential history of, to a certain degree, financial mismanagement, but this debt, this deficit is a priority. I don’t think we addressed this in an emotional point of view. We have to think about it cerebrally, and we cannot, unfortunately, we cannot make Social Security and Medicare untouchable.
I’m sorry. There’s just no way around it. The math doesn’t work. So, we’re going to have to address that in some way. It may be our children or maybe our children’s children, or it may be me, but it’s going to be addressed. Don’t just, and I know you won’t, but don’t just grab a headline strategy and run with it.
Think critically about and here’s the key phrase, the indirect consequences of those decisions. So, for example, you may see something like, we’re going to increase the corporate tax rate. At first glance, that makes sense. They need to pay their fair share, but then you say, okay, well, then those businesses, there’s a certain tipping point, where those businesses will move their manufacturing facilities or whatever else to another country. There’s a tipping point.
We could say let’s tax Social Security or, you know, increase the estate tax and say, well, that sounds great. But what you may find if the indirect consequences is that the wealthy and the affluent will find strategies to kind of work around this, whereas those that don’t have resources will end up paying more in taxes.
So, we have to think critically about the indirect consequences and F. Scott Fitzgerald said this really well. Hear me out here. The truest sign of intelligence is the ability to entertain two contradictory ideas, simultaneously. The truest sign of intelligence is the ability to entertain two contradictory ideas simultaneously. So, you take these two ideas and you just kind of say, okay, I understand one side of the aisle and I also understand the other side of the aisle. I can make an argument for both. That is intellect.
And so, as you go through these presidential debates, try to make sure you really can explain the other side and then you draw conclusions. And a lot of us are going to say we’re going to say this. This is the most important election of our lives. That’s going to be a phrase that all of us are going to say.
And we’ve said it over the last 20, 24, whatever years we’ve said this. This is the phrase we’ve said. So, is it? I suppose it is or maybe we’re being dramatic. I mean, I don’t know. We say it all the time. We do. You’ve got to admit, we say this all the time. It’s interesting, though, how the stock market and the economy still go up, still move, but still accelerate. They still grow regardless of who’s in office, regardless.
You know, believe it or not, since 1947, the U.S. economy has done better in a Democrat controlled White House and Congress, but the stock market has done better under Republican controlled White House and Congress. Now, just so you know, I just said two different things and sometimes our brains use those synonymously. Economy. Markets. Kind of seems like it’s all one in the same.
The economy is different. The economy is jobs and also the phrase we hear is GDP, but the stock markets just different. It’s investing in companies. I’m not going to talk about the economy but let me talk about the stock market. You know, I’ve been doing this since 1999, and I’m always surprised how well the stock market does, despite the events.
It’s amazing. I mean, think about this. Since 2008, we had Obama in office, we had Trump in office; polarizing people. But 2008, business not just survived it thrived. Cloud computing. We don’t have files in our office anymore. Tablets, rideshare, Uber, like who would have thought? I mean, I was so tired of going to the airport down to 2222. Now you got Uber. Who would have thought?
Virtual home assistants. Hey Google, play piano music. Fitness trackers, I’ve got one right now on. I can check my sleep, my alarm clock. Electric cars, virtual payment systems. You know, you can cash out at the table. Your waiter can come. You know, in some cases they don’t come. You just cash out at the table.
I mean, smart homes. I don’t even use my wired speakers in my home, I just use the smart speakers. Of course, you got social media, YouTube. Love it or hate it, it’s crazy. You can just watch YouTube; you don’t even need to turn a dial anymore. Zoom. Artificial intelligence and what it’s doing in the medical space. I mean the list could go on and on.
Companies will thrive regardless who’s in office. I love companies. I love being an owner of companies. Long term makes a ton of sense. You’re investing with really brilliant minds who are driven, who have aligned motivations, with me as a shareholder, and they have incentives to win, to make money.
Now, you may not at your stage in life, you may not want 100% of your money in companies. You may not want to own stocks. I don’t know the amount that’s appropriate, it could be 10%. It could be 20%. It could be 100%. I don’t know, that’s between you and your advisor. You may want some bonds, you may want some alternative investment, structured products.
Previous shows we dove into those unique strategies that we have put together for clients who have an allergy to stocks, because I get it, but for those that have some tolerance for stocks, I just want to say, enjoy them. You’re investing in innovation. You’re investing in America. I mean, we take it for granted. It is an amazing thing to own stocks through the stock market over an extended period of time.
And regardless who’s in office, it’s my conviction that will thrive despite who’s president. Like I said at the beginning, investing isn’t simple. I mean, it’s simple. Excuse me. Investing is simple, but it’s not easy. Warren Buffett actually said that. And this election year, it’s just not going to be easy. So, you got to stay in control of your emotions.
Don’t let the noise influence. Stick with the plan and remember, you think different when you think long term. Have a great day.
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