Adapted from a letter that I sent to my private wealth management clients on August 22, 2024.

Current economic and political conditions are prompting clients to ask two big questions in recent days:

Markets are so high; aren’t we “buying at the top”?
The election is coming up, so what’s going to happen with the markets?

Let’s start with the first question. We always like the idea of “buying low,” but the reality is that waiting for those golden moments can be very costly in terms of lost opportunity! Happily, we’ve had strong market gains this year, and we climbed to new market peaks. It is reasonable to wonder if we are “buying at the top” and might be better off waiting for a downturn, but it turns out that “buying high” has turned out to be better than just fine for long-term investors.

J.P. Morgan put together these charts showing that investing at all-time highs has historically been quite lucrative for investors:

J.P. Morgan explains:

Investing at all-time highs: Investors usually use all-time highs as a reason to stay in cash or on the sidelines. However, history suggests that investing at all-time highs is not a bad strategy because new highs are typically clustered together. In other words, market strength begets more market strength. On the left, we show the S&P 500 price index and mark each all-time high that set a “market floor,” or an all-time high from which the market has never fallen more than 5%. Since 1950, there would have been many instances in which an investor sitting on the sidelines with markets near all-time highs would have never seen a better entry point. On the right, we show that returns from investing on any given day versus an all-time high are comparable and, in some cases, better when investing at market highs.

Now, question two is one that comes up every major election year.

You’re not alone if you’re thinking, ‘it’ll be a mess if they win, and we lose, so shouldn’t we sell?’ It’s a common fear during a presidential election year.

However, historically, markets have not really cared which party is in the White House because red or blue, the direction of asset prices has continued to go up over time. I know many of my clients care deeply about the direction of our country and instead of pleasing half of them by giving the financial nod to one party or the other, I’m afraid I disappoint nearly all of them, when I make this point. After the election, I expect future investment gains will ease the disappointment though.

Take a look at this chart from Goldman Sachs that shows the power of being fully invested through political swings [chart was created when Joe Biden was still a candidate, as noted in the text]:

I recently attended a wealth management summit where David Kelly, J.P. Morgan’s Chief Global Strategist, summed up similar research by saying:

“Don’t let how you feel about politics overrule how you think about investing.”

In a recent radio interview, I also shared research on how elections have impacted markets (or not) over time. “Capital Group, a large asset manager, took a look at 90 years of investment data, across 23 election cycles from 1932 until 2023. They found that the primary seasons tend to be volatile, but markets bounce back strongly, and that stocks have returned 11.3% in the 12 years following primaries compared to 5.7% in similar non-election years. So, very strong returns following the primaries.”

You can listen to the audio and read the full transcript here:

Money Matters: The Key to Positive Returns During Election Years? Stay Invested

Still don’t believe me? Here’s a great piece Brian Levitt of Invesco put together discussing markets and presidential elections:

The presidential election and its effect on the stock market | Invesco US

I discuss current market conditions in more detail in this recent radio interview.

Erik Carlson, CFP® Joins the Team!

We are delighted that Erik Carlson, CFP® has joined our team!

Erik has a strong wealth management background, seasoned in a trust company environment, and has earned a healthy list of well-regarded credentials.

Erik grew up on a 125-year-old family farm in northern Minnesota. He and his wife, Kristin, have two kids, ages 6 and 8, and they all enjoy the north shore, state parks, hiking, Minnesota sports, books, and puzzles.

When I asked Erik about his career decisions, he said:

“I chose this field because I saw how creative and impactful we can be in helping people achieve their financial goals. I especially love collaborating with clients on their charitable goals and using their assets in the most tax-efficient way to benefit the causes they care about.”

“I decided to join Scott’s team because of their commitment to their clients, a focus on staying ahead of current trends in financial planning and investment management, and the character of the team members.”

Erik earned his bachelor’s degree at Bethel College, a master’s degree from Luther Seminary, and in addition to the Certified Financial Planner (CFP®), Erik’s professional training has included the Certified Trust and Fiduciary Advisor (CTFA), Chartered Advisor in Philanthropy (CAP®), and Retirement Income Certified Professional (RICP®) designations.

What, not When

With market highs, contentious elections, and widespread uncertainty, our approach, as always, is focusing on what to own in portfolios and how to appropriately match those holdings with the timeline and priority of an investor’s financial planning goals. This approach has allowed us to reliably meet spending needs and financial goals through an array of market conditions. I am not aware of any investor who has consistently had long-term success using a when strategy and trying to move all in, or all out, of markets.

Today’s market highs and uncertain conditions are stepping stones on the path to future returns.

As always, please let us know if you have any questions.

Thank you,

Scott Oeth, CFP®, MSFS