Fisher Investments’ Founder, Ken Fisher, Debunks: "My Political Party is Best for Stocks"

Transcript

Ken Fisher:

What you think about politics shouldn't be any of your stock market business, unless you know way more about how markets work than most people do, in which case, you're not going to waste your time listening to me.

So, every month, I take another little chapter out of my Debunkery book to cover something that, in the book, I depicted as bunk, and how you know it's bunk, and what you do about it or don't do about it. And so, this month, I'm looking at number 41, which is, "My Political Party is Best for Stocks." Now, I don't care if you're political at all—Democrat, Republican—whatever. There is this big tendency to believe that my side is right, the other side is wrong, if my side wins, things will be good, if their side wins, things will be terrible.

I hear this articulated here, in 2024, as from a Republican—"If Harris wins the presidency, it's going to be terrible, from Democrats, as if Trump wins the presidency, it's going to be a disaster. Now, the fact of the matter is, I just want you to think about this: I'm going to say this once, and then I'm going to babble incessantly. This is almost always wrong. It's wrong in 2024.

What you think about politics shouldn't be any of your stock market business, unless you know way more about how markets work than most people do, in which case, you're not going to waste your time listening to me. Let me take you through a little of this. First, there are some things that matter in politics as it relates to stocks, and I've written a lot about that in my lifetime. There's a regular cadence, tied to our political biases, that lead the third year of a president's term to be almost perfectly good, almost always. The fourth year of a president's term to be pretty darn good, but not as good as the third year's. The first and second year to have the most stock market risk. So, next year could get a little riskier.

For gridlock, to have gridlock, meaning, president of one party and at least one of the chambers of Congress to be of the other party, to have better stock market years overall than when one party has the presidency, House and Senate. But let me speak against that for a moment. You got plenty of examples of when you've had the president, House and Senate of a party that you hate, where the stock market's been great. Let me take you to that. Let's say you're a die-hard Democrat and you hate Donald Trump because, as I think you know, some people do.

Therefore, you think if Donald Trump wins, it's going to be bloody disaster. Well, again, I'm not talking social policy. I'm talking about stock market. Because mostly all I talk about is capital markets. It's not my place to tell you about morality. It's not my place to tell you about what religion you should believe in, or who you should marry, or where you should send your kids to school. That's all outside my bailiwick. But I'm just going to tell you, let's say you think Donald Trump's going to be just terrible. Remember that Donald Trump got elected in 2016 with the Republican House and Senate, and you got a 20% return the next year when most Democrats thought it was going to go down.

In fact, on the day that Donald Trump got elected, most people thought it was going to be a bloody disaster right away. And the market whipsawed and went up. But then, you could be a Republican. I think it's going to be just terrible. If Vice President Harris gets elected to be president of the United States because she's—well, you know what you think she is. You don't need me to tell you what you think she is. Because you're a Republican. But I want to point out— President Biden got elected in 2020, and in 2021, his first year in office, market's up 26%. With a Democratic House and Senate. That happens more often than you might suspect.

I can't remember the number off the top of my head but go back and look at Barack Obama's first inaugural year, and it was one of those 20% kind of numbers. If you were a Republican, you'd think that was just terrible and you wouldn't expect that to happen. And if you traded based off of your view that your party's right and the other party's wrong, you're going to get yourself whipsawed so many times. Now, mind you, then there's the other one that people do, all the time.

They look at the long-term history, and if you actually look at the long-term history in the period that I normally cite—1925 to present, the time period where we have really good accurate data for the S&P 500— you will see that the Democratic presidents have done better than Republican president's terms—four years, four-year periods. But if you got a statistical bone in your body, you take the most extreme of them and presume something extreme was going on. Throw them out. And when you do that the way a statistician would, both parties have near identical returns.

I actually did that in the prior Debunked chapter, Debunked number 40, where I showed that if you do it the way a statistician does it, both Republicans and Democrats have effectively identical returns. You just throw out a few extreme years, the extreme years caused by extreme things, things that necessarily the president wouldn't have had any real control over. And what do you get? You get both parties acting the same. Almost always, your political bias hurts you when it comes to investing.

I am not saying that your views are wrong about social issues, about cultural issues, even about longer term economic issues. Remember, the stock market doesn't care next year about how the economy does ten years from now. As I have said many, many times, the stock market prices the approximate next 3 to 30 months. Sometimes a little on the shy side of that, sometimes a little on the long side of that, but only by a little.

Long-term economic trends, it doesn't price until you get closer to them. Whatever your views are about what Donald Trump or Kamala Harris might do or not do to the stock market, you better be darn sure they're not consistent with your political biases, because your political biases in the stock market will always hurt you. Not necessarily wrong in Main Street, not necessarily wrong in culture and social issues might be right on all that. But in the stock market they blind you.

So, on that, the whole purpose of the Debunked number 41 is to show you exactly why the notion that my party is good for stocks is actually wrong. Thank you for listening to me. I hope you found that useful and want to tune in next month when I do another debunk off of Debunkery.

Voice of Ken Fisher:

I very much hope you enjoyed this video as part of my series on debunking Common Market Myths. To watch more videos like this, click the link on the screen and make sure to subscribe to Fisher Investments YouTube channel. Thanks so much for listening to me.