Some people believe that “those who refuse to learn the lessons of history are condemned to repeat them.” Some pundits amuse themselves by saying “history may not repeat itself, but it does rhyme.” My view is that history is the best flashlight we have to find a pathway in the dark.
Here are some lessons I’ve learned about the history of the stock market.
I KNOW that the stock market is inversely related to uncertainty. As uncertainty goes up, the stock market goes down and vice versa.
I KNOW the weakest two months in a presidential election year are September and October, as uncertainty before election slowly rises.
I KNOW the stock market is lower today than it was a month ago.
I KNOW the stock market is almost always higher after a presidential election.
I RECALL my 2016 election call that a Trump victory would cause an immediate 500 point drop in the Dow but would fully recover well before the inauguration. In fact, it dropped 800 points but fully recovered the next day. That prediction was correct enough.
I EXPECT the stock market to continue drifting lower, until election results become apparent, before rising strongly, regardless of who wins. Reduced uncertainty lifts the market.
Of course, this does not justify “market timing.” Nobody is smarter than the market. Nobody should just sit on their cash and then suddenly invest it the day before the election. It is far more prudent to start the process of putting fresh money into the market before then.
I KNOW this election is the most important in our history, but I’ve heard that in every election during my lifetime. Supporters of every losing candidate during my lifetime have expected hell-on-earth, which has never happened.
While we are no longer “the shiny city on the hill” that President Reagan wanted us to be and while civility no longer has a place in this country, we are still the greatest power on Earth and will be just fine! Consumers will continue to consume. Businesses will continue finding ways to make a profit. Government will continue to operate. America will be just fine!
