What We're Thinking: Markets and Elections

  

Decades ago, Mario Cuomo summed up elections perfectly: “You campaign in poetry and govern in prose.” Keep that in mind as we hear a lot of poetry in the next few months.

People ask, “What will happen if so and so is elected?” Or more bluntly, they'll assert, “If that person is elected, terrible things will happen.”

 

And you might be wondering if there's something you should do with your investments.

Since our analytic bias is rooted in evidence, we took a look at the six seven elections that have happened in this century. We found that over the one-year period before and after a Presidential election, markets performed in line with long-term averages. Here's the data:

                             All Stock Portfolios   Diversified Portfolios         Background

1999-2001                      -15%                             -  2%                  Dot-com Crash. 9-11. Bush elected.
2003-2005                     +24%                            +20%                  Bush re-elected.
2007-2009                      -21%                             -12%                  Great Financial Collapse. Obama elected.
2011-2013                     +52%                            +27%                  Obama re-elected.
2015-2017                     +32%                            +20%                  Trump elected.

2019-2021                     +50%                            +24%                  Covid. Inflation. Biden elected.

2023-2025                     +53%                            +37%                  Trump vs Biden Harris. Tariffs. Mag7.

Average                         +25%                            +16%                  Up 71% of the time.

A recent BlackRock study revealed that election year returns average 7.3%. All other years averaged 7.5%. And another version showed no meaningful differences in election year returns versus other years.

Just keep moving folks. Nothing to see here. “Elections have less impact on the markets than some would like you think. Ultimately, it's the long wave of economic fundamentals that drive markets beyond any one election or any one party.”

Our purpose is to give you actionable, evidence-based information, so you can confidently get on with your life. Financial plans are designed to sustain you for 20, 30, maybe 40 years. One election is not going to change that. Having a written financial policy statement, sticking with your asset allocation, having a comfortable cash reserve, staying diversified, and rebalancing as necessary will carry the day.

Enjoy the poetry.

Jim Cosgrove, CFP, Plano, TX             jim.cosgrove@verizon.net      972-489-0262
Jim Cosgrove, Partner, San Jose, CA   jimcos42@gmail.com             408-674-6315

What We're Thinking: Real Investments for Real Life

 

There's been a lot of news noise in the past few weeks about the creation of ETFs (exchange-traded funds) that give us a more convenient way to invest speculate in cryptocurrencies.

We covered Cryptocurrencies back in October, 2021. Nothing's happened since then-- including ETF creation-- that's changed our opinion on the topic. In a word: avoid.  

The topic today is real investments for real life. Like stocks and bonds. And specifically, the outlook for 10-year returns. Vanguard, along with the other bigs like Fidelity, JP Morgan, Blackrock, and so on, publish material for advisors to use in guiding their clients. We're going to share that with you right here, right now.

Here's Vanguard's graphic. The light green bar was their outlook at the end of 2021. The solid green was at year-end 2022. And the dark green is the current outlook.

 

Several things pop out.

• The overall outlook changed little from 2022 to 2023.
• The outlook for non-U.S. stocks is better than for U.S. stocks.
• The bond outlook is markedly improved and there's little difference between the U.S. and non-U.S. outlook.
  

So, how does this translate to the portfolios most of us hold? Here are the estimated annual returns by portfolio asset allocation:

50% U.S. & global stocks with 50% U.S. bonds = 6.7%.

This is generally the most conservative portfolio we suggest. The most recent annualized 10-year return was 5.4%.

60% U.S. & global stocks with 40% U.S. bonds = 6.9%.

This is the classic portfolio most people hold. The most recent annualized 10-year return was 6.1%.

70% U.S. & global stocks with 30% U.S. bonds = 7.2%.

Investors willing to endure periodic sharp corrections can lean into this. The most recent annualized 10-year return was 6.8%.

80% U.S. & global stocks with 20% U.S. bonds = 7.5%.

Aggressive investors with a handy supply of Pepto-Bismal and people under age 40 might choose this allocation. The most recent annualized 10-year return was 7.4%.

There you have it. Real investments for real investing for real people. Investments you can live with that are likely to beat inflation and move you toward your goals. Stay the course. Just keep buying. Same as ever. Our only apology here is for the low excitement level. Contact us to talk about your real life.

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.

What We're Thinking: Safe Cyber

Morgan Stanley settled a case with the state of New York for $6.5 million for compromising the personal information of millions of customers nationwide. The company “failed to properly decommission its computers and erase unencrypted data in devices that were later auctioned off while still containing consumers’ personal information."

Closer to home, have you been notified that your Amazon account has been compromised? Or have you been asked for some additional information before the air fryer you really didn't order can be shipped? Or maybe the Social Security Administration would like to inform you of benefits due to you? These are just a few examples of attempts to capture your personal information and gain access to your financial accounts.

Managing our lives online is a modern day reality. And no, saving paper statements won't help. It's time to fortify your defenses against the numerous threats we know about and especially the ones we don't know about.

Fortunately, there's plenty of credible information available to help with that. A great set of guidelines is this five-page presentation titled "Simple Safeguards: How to Stay Safe From Identity Theft and Cybercrime."  Here's the safe link:

https://thelanzagroup.com/wp-content/uploads/2024/03/jeff-lanza-identity-theft-and-cybercrime-handout-2023.pdf

Here are the topic headers.

1. Prevent Identity Theft.

• Create an online Social Security account.
• Freeze your credit reports.
• Protect your paper.

2.  Watch Out for Tricks.

• COVID Scams.
• Account takeovers.
• Wire transfer fraud.

3. Protect Your Computer.

• Beware of pop-ups.
• Keep your software updated.
• Use passphrases instead of passwords. 

4. Preventing Identity Theft.

• Protect your Social Security number.
• Get access PINs from the IRS and FTB.
  
• Monitor your medical and healthcare documents.
• Provide death certificates to credit bureaus and financial institutions where a deceased person had accounts.
• Steps to take if you're a victim of identity theft.
• Social media.
• Robocalls.
  

5. Preventing Cybercrime.

• Protect your credentials.
• Hover to discover.
• Use multi-factor authentication (MFA).
• Use antivirus software.
• Unsubscribe from unwanted emails.
• Securing mobile devices.
• Your home wi-fi.

 6. Common Cybercrime Scams.

• Fake emails.
• Email account takeovers.
• Tech support scams.
• Email extortion.
• Ransomware.
• Real estate wire transfer fraud.

We're not cyber security pros. But we know enough to take reasonable and easy steps to manage our online life. Good defenses are available. The number one defense is to be a frequent and proactive monitor of your information. Contact us if you have any questions.

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.