Well, the midterm elections are behind us, and depending on your political views, you may be feeling elated, depressed, or, hopefully, somewhere in the middle.
Either way, I want to share some perspective that I think is particularly important when it comes to your investments.
One thing I've learned over the years is that politics and investing usually don't mix very well. It's easy to let our feelings about an election influence how we think about the economy and financial markets. But history tells us that making investment decisions based on which political party is in power is rarely a winning strategy.
Looking at the chart, you'll see the growth of the S&P 500 since 1950, with the different colors representing Democratic and Republican administrations.
What's remarkable isn't which party was in power during the strongest periods. It's that the market has continued to move higher over time under both parties.
We've experienced wars, recessions, inflation, political scandals, tax increases, tax cuts, and just about every imaginable political environment.
Through it all, American businesses have continued to innovate, grow their earnings, and create value for shareholders.
That doesn't mean government policies don't matter. They certainly can. But over the long run, corporate earnings and economic growth have been far more important drivers of stock prices than election results.
We invest in businesses, not political parties. And I don't believe the outcome of an election, by itself, is a good reason to change a long-term investment strategy.