Retirement Investor

Your Politics Are Very Expensive!


Since the modern monetary system was adopted in 1971 by the Nixon administration there have been ten total presidential administrations. Nine of the ten administrations presided over positive returns in the stock market. George W. Bush was the only president to see negative returns during his eight-year presidency. Eight of the ten administrations presided over stock market returns greater than 10% per year. In addition to Bush, Nixon had relatively subpar returns (2.04%) and negative real returns. Ultimately, if you were blind to presidential politics, it was beneficial to your portfolio.

How can this be?!

Bill Clinton (Democrat) saw returns of 17.32% annualized which topped the list for presidents that served at least one full term. Bill Clinton (Democrat) came into office in 1993 and left in 2001. Microsoft hit the S&P 500 top 10 in 1994 and soared to the top by 1998. Cisco Systems hit the top ten in 1997 and was top 3 by 1998. America Online, Lucent Technologies, IBM and Intel were on the list by the late 1990s. Bill Clinton (Democrat) did not develop the internet and networking technology, but these companies did. He was the lucky beneficiary of it. In fact, Clinton arguably had policies that were designed to slow the economy including balancing the budget and tax increases. Fixating on the tax increases would have been very expensive.

George W. Bush (Republican) is the laggard on the list with -3.58% annualized. The Bush administration saw a few setbacks. The stock market was in a correction following his inauguration and a recession started two months later in March. The Clinton administration may have benefitted some from the timing of the inauguration while the Bush administration was hurt. Then, eight months later, September 11th occurred, perpetuating a selloff that lasted another year. The market recovered markedly until the financial crisis. I’d argue that Bush had little to do with the recession in 2001. I blame Al Qaeda for 9/11, and I think there is plenty of blame for many parties (political and otherwise) for the financial crisis.

Clinton (Democrat) was probably pretty lucky, and Bush (Republican) was probably pretty unlucky, so it probably is not worth spending so much energy on presidential politics when it comes to your investments.

When are politics worth paying attention to?

There are a few principles of policy to grasp that can help be your guide. Here are a couple of principles:

  • Budget deficit growth is stimulating and inflationary 
  • Consistency and competency at the Federal Reserve is important

On these principles, despite rhetoric, there is a lot of bipartisan agreement. Here are a few examples:

During the financial crisis, George Bush (Republican) and his Treasury Secretary, Hank Paulson, passed the $700 billion TARP (Troubled Asset Relief Program). In the House, a bipartisan 91 Republicans and 172 Democrats voted yay. Similarly, the $2.2 trillion CARES Act (Coronavirus Aid, Relief, and Economic Security Act) signed by Trump (Republican) passed unanimously in the Senate and near unanimous vote in the House. Joe Biden (Democrat) passed a $1.9 trillion pandemic stimulus package following his election in 2021 that was panned by Republicans, but in late December 2020, Trump (Republican) had signed a $900 billion stimulus bill while complaining it was not big enough (he wanted $2,000 direct checks vs. $600), even tweeting “STIMULUS! Go Big or Go Home.”

Ben Bernanke was appointed chairman of the Federal Reserve in 2005 by George W. Bush (Republican). He was a hero of the crisis as he brokered the sales of Merrill Lynch and Bear Stearns and oversaw the bailout of AIG and the automakers. He also started a quantitative easing program that added much needed liquidity to the system. Bernanke was reappointed by Obama (Democrat) in 2009.

Similar to Bernanke, Jerome Powell was nominated by Donald Trump (Republican) and renominated by Joe Biden (Democrat). Paul Volcker was nominated by Carter (Democrat) and renominated by Reagan (Republican) despite orchestrating a recession. Alan Greenspan was nominated by Reagan (Republican) and continued to serve during George H.W. Bush’s, Bill Clinton’s, and part of George W. Bush’s presidencies.

All of the presidents on this list, with the exception of Clinton (Democrat) and arguably Carter (Democrat), liked to grow the deficit, especially during times of crisis or war (hot or cold).

What to do?

Asset Management Resources is an RIA, and a typical client is an individual or family planning for decades to come. Importantly, we are not a hedge fund where we have performance measured annually. I like to measure performance over a 3-year period, understanding markets can be irrational for a time. A long-time horizon allows our clients to avoid gambling on government policy while concentrating on earnings growth and value. However, we still get bombarded with theories and concerns that usually are speculative, priced in, or both.

Separate your personal politics from your investment policy. Be wary of cable news hosts. I have seen very few Fox News or MSNBC hosts that are concerned about your personal wealth. Try to avoid social media and concentrate on more legitimate news sources. Ask yourself or your advisor if your concerns are priced into the market. Remember that you are not a hedge fund and do not need to speculate and gamble on government policy.

Finally, do not let your politics detract from your wealth any further!

Brian Regan, CFA

Brian J. Regan, CFA®, MBA, is the Chief Investment Officer for Asset Management Resources, LLC. His responsibilities within the firm relate to investment research, portfolio design and implementation. He has education and experience in portfolio risk management, asset allocation, fixed income security selection, equity security selection, and macro-economic analysis. In 2010, Brian started his career at State Street Bank’s Treasury department as a Balance Sheet Consultant for a $110 billion portfolio after completing their highly selective Financial Analyst Rotational Program. He then moved to EMC Corporation where he managed a $15 billion corporate cash fixed income portfolio generating $110 million in portfolio income. In addition to the corporate cash portfolio, Brian maintained the fiduciary responsibilities of EMC for the corporate pension and retirement plans. Succeeding the Dell acquisition of EMC, Brian became a Management Consultant and an integral figure in the restructure and sale of Mid States Supply Company, the restructuring and sale of Enersafe, Inc., and the restructuring of a popular toy company. In each restructuring case, Brian helped to save hundreds of jobs, reclaimed capital for lenders, and maintained value for equity stakeholders. Brian received awards for excellence including the State Street Above & Beyond award and the EMC Gold, Silver & Bronze awards. In 2015, the CFA Institute and the Boston Securities Analyst Society credentialed Brian as a Chartered Financial Analyst Charterholder (CFA®) through passing a series of tests. The CFA institute promotes good stewardship and high ethical standards. In 2021, Brian received his MBA from the Boston College Carroll School of Management. A 2010 cum laude graduate of Boston University’s School of Management (Questrom), Brian takes to heart Questrom’s mission to “prepare innovative and ethical leaders who understand the impact of business on society and create value for the world”. Brian resides in Boston with his wife Erin. He enjoys Cape Cod beaches in the summer, skiing in the mountains in the winter, and New England sports year-round. Brian has hiked in Alaskan mountains, perused the Louvre in Paris, jet skied in Monte Carlo and scuba dived in the Virgin Islands.

  • 1

Leave a Comment

Your email address will not be published. Required fields are marked *