What do cicadas and Election 2024 have in common?

Hi and Happy Spring,

We’ve started the year off well, but there are many, many more things to come not least of which is the US election. Before we get into my thoughts about the election and the markets, I understand that this can be a very polarizing topic. I do believe that elections and voting are important, and each person should vote according to their beliefs. However, as your Financial Advisor, I’m politically neutral. 

A few weeks ago, Dani and I were at Costco (world’s greatest store?), and we came across a collection of Charles Schulz’ Peanuts books. When we got home, I couldn’t wait to read them to Ethan and Matthew. What book does Ethan Pick? “Snoopy for President.” Sounds about right…


 

What do Brood XIII and Brood XIX Cicadas and Election 2024 have in common?


I can’t exactly explain how I come across all the random articles that I read, but I can share with you why I read so many different things (and arguably things that seem unrelated). Growing up in rural Louisiana, I didn’t have many options to travel. Exploring the woods around where I grew up and reading were my vehicles to new places. I can vividly remember laying in the grass (yes getting eaten alive by bugs) watching clouds and daydreaming. This is probably why I explain everything in stories. It’s how my mind works.

In 2024, two different broods of cicadas will come out of the ground in the Midwest and Southeast (Brood XIII and Brood XIX). Having the two different broods come out at the same time is rare (this combination a once in 221 years kind of rare), and even more rare is that the two broods are geographically near each other. Basically, those of you in these areas will be living in a modern-day Biblical plaque… well kind of. **See this article on Cicadas Billions of cicadas will emerge in rare 2024 double-brood event (nbcnews.com)

I’d be willing to bet that those of you in these areas have done very little to change your day-to-day lives that is unless you’re a farmer. These cicadas will be a nuisance, maybe chew up some plants in your garden, make you use more windshield wiper fluid and carwashes. But you will likely look back on this year of the cicadas and find that your life was little changed. Is it possible that this year’s election will do the same?

 
Superlatives are the MOST extreme part of this election!


Election 2024 isn’t as rare as a 221-year occurrence of double cicada brood, but it may feel that way for many people. I can’t even count the number of times that I’ve heard people say that this election “is the most important election of our lives.” Really? Like Really? Unless you die before the next presidential election then it’s impossible to know if this is the most important election.

Some years ago, I lived in Portland, OR. One of the first observations I made when I moved there (besides the rain!) was that superlatives were as common as the rainy days! If I asked someone where they would recommend getting a certain type of food, it didn’t matter who I asked. The response was the same. “This is the GREATEST …” Often time, the restaurant was good, not great, but good.

Dani will tell you that I rarely use superlatives. This was a hard thing for her when we first met because she thought that I didn’t like somethings (maybe everything?). However, I just want to be able to have categories in life. Good is good, but it is not GREAT. Meh is meh but not SUPER MEH…. (In my opinion) The problem with the overuse of superlatives is that if everything is ***Insert your favorite superlative*** then how do we delineate what really is the greatest or worst or most important or at the very least, better than the last great or worst thing?

 Moreover, we know that bad news sells. So, if bad news sells then extreme new must sell EXTRA??? One study showed that newspapers that put good news consistently as their headline saw sales go DOWN by 2/3. This isn’t surprising, and in our modern age of technology – 24/7 news and social media – what else would you expect from organizations who are depending on “click” revenue??? The media isn't going to pick up the good stuff. It doesn't sell.

 

History can be calming when you think about it.


The first election that I was able to vote in was when I was in college. The night of the election I walked out of the dorm and called my folks to talk about it. Apparently, I had been oblivious to the nastiness of elections and this one was shocking to me. To my surprise my dad said something to the effect of “I remember in the 70s the nasty things that were said about the candidates then.” I wasn’t prepared for that. I think I was expecting him to be shocked and surprised at that election like me.

 Of the many things I read, history is a consistent category. Since becoming a Financial Advisor, I have learned that studying the history of markets and the economy is important, and I have grown to appreciate this financial industry axiom: “history doesn’t repeat itself, but it rhymes.”

 Here are some historical stats that may help calm the 2024 Election angst:

• Recessions in the year of an election matters (Source: Capital Group Guide to Investing in election year – not attached.)
  • Only 1 out of 7 presidents were reelected if there was a recession in the election year.
  • 12 out of 12 presidents have been reelected in a year where there was no recession.
• S&P 500 Average Annual Returns from 1933-2023 (Source: Capital Group Guide to Investing in election year – not attached.)
  • Unified Government – 14.4%
  • Unified Congress, president in other party – 11.7%
  • Split Congress – 13.7%
• S&P 500 performance since 1925 (Sources Global Financial Data, Inc. and FactSet, as of 01/04/2022. S&P 500 total returns by calendar year 1925-2021.)
  • A president’s fourth year of their term 
    • Positive return = 83.3%
    • Republican Average return = 8.9%
    • Democrat Average return = 14.0%
    • All Periods = 11.4%
  • A president’s first year of their term
    • Positive return = 60%
    • Republican Average return = 4.9%
    • Democrat Average return = 17.2%
    • All Periods = 11.3%
  • Since 1961 if you started with $10,000 (Source Markets, Fed Policy and Elections | Charles Schwab)
    • Only invested when Republicans had control.
      • You’d have about $100,000.
    • Only invested when Democrats had control.
      • You’d have about $500,000.
    • Stayed fully invested.
      • You’d have about $5,100,000

What do we do with this data? Vote Democrat? Not necessarily. All data is void of context, but it does give us the ability to look back as investors and see that ignoring the noise (and superlatives) would have been ideal. ***See page 12 of the attached 2024 election_ People care about elections_ Markets don't***


Attached are a few pieces from different investment firms that I follow. They reiterate what I am encouraging. Vote. Be concerned about the future of our country. BUT, the markets and investments aren’t tied to politics the way it feels in our emotions.

• Markets, Fed Policy and Elections | Charles Schwab
• Investing in a U.S. Presidential Election Year: A look at Market Performance and Fed Moves (attached)
• Guide to Investing in an Election year (attached)

 
Some advice from a friend.

 So, what do we do with all this? Is now a good time to invest or should I wait? Or what should we do until we get through the elections?

These questions seem reasonable enough on the surface, but, in reality, they miss the point of being an investor. Short term speculation and guess work is nothing better than gambling. Besides, short term movements in markets (even dramatic moves) are rarely enough to derail long term plans and investments. We are investors not gamblers.

If you’re really concerned about Election 2024 then consider increasing your cash position an extra few months but do NOT abandon your long term investment plan and goals. In future quarterly emails, I’ll tackle some of the fallacies in behavioral finance. One of them is confirmation bias. It’s the tendency to look for or only see information that confirms our deeply held beliefs. Don’t confuse political desires/fears/expectations with your personal financial goals.

The markets are forward looking and to that extent only about 12-18 months(ish) out so if they can’t see the future neither can we. What we do know is history -- history tells us that gambling is a good way to become poor, but investing is a great way to become wealthy.
 

Points to remember this year (and in years to come):

• Try to humanize politics.
  • Remember there are humans behind all of this, and VERY FEW people in all of history were truly evil.
• Research history.
• Get off social media.
• Different perspectives aren’t necessarily bad perspectives. They are just different.
  • Often when two perspectives are “polar” opposite, the objective of those views are the same – help the poor, help all people advance, help eliminate discrimination, have a world that our children can live in … etc. The differences are often HOW to achieve the goals.

So what do Cicadas and Election 2024 have in common? Nothing. This election is not as rare or life changing as the media wants us to believe. However, Brood XIII and Brood XIX Cicadas emerging in the same year is rare and worth the superlatives.

 
Please feel free to share this with friends or family that you think would appreciate it.

 

Next time, we’re getting into the other FOMO. Forgetting One’s Main Objective.

 

Oh… and we’re voting for Snoopy! (Ethan says so.)