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The Stock Market Doesn't Care About Political Parties | Series 7.3
Episode 321st March 2022 • Enjoy More 30s: Family Finance • Joseph P. Okaly
00:00:00 00:09:03

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How could these diametrically opposed groups that are influencing basically every aspect of public policy not cause the stock market to play favorites?

  • When it comes to the stock market, though it historically doesn't really care one way or another what political party is in office. (03:33)
  • What the stock market tends to be influenced by more than anything, though, is the certainty versus uncertainty factors that we've brought up a number of times. (05:07)
  • But based on each individual administration's policies, and what they put into play can certainly affect how the stock market reacts to that news is, do they think this will increase the growth of companies? (07:02)

Quote for the episode: 'If you can say "I now know better what generally affects the stock market and what generally doesn't", then you have succeeded in the main takeaway from today.' (07:20)

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Transcripts

Voiceover Audio:

Welcome to the Enjoy More 30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

Voiceover Audio:

from simply enjoying life.

Joseph Okaly:

Hello, and welcome to the next episode of this

Joseph Okaly:

Raising Your Investment Mindset series. This series we're really

Joseph Okaly:

trying to help you reframe how you may view the scary unknown

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that is investments, and therefore be able to utilize

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them in a more constructive way, better reach your goals, and

Joseph Okaly:

really just make life more enjoyable.

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As always, if you like what you are hearing, please make sure to

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subscribe, follow us on Apple podcast or really wherever you

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listen. Clicking those stars, leaving the reviews, it really

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helps us reach the literally millions of other young families

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out there just like you.

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Last week, we discussed how to many people wind up buying high

Joseph Okaly:

and selling low because of the role that those things called

Joseph Okaly:

emotions tend to play in our decision making, and the lack of

Joseph Okaly:

education that tends to be out there that's provided to us, the

Joseph Okaly:

lack of perspective on what's normal, so a 10% drop in the

Joseph Okaly:

market every 18 months on average actually is normal. So

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if you haven't checked out that episode yet, definitely do that

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soon.

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Today's episode is titled The Stock Market Doesn't Care About

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Political Parties, which may sound like it doesn't really

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make much sense. You know, how could these seemingly

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diametrically opposed groups that are influencing basically

Joseph Okaly:

basically every aspect of public policy not cause the stock

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market to play favorites, right? The goal for today's episode

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though, so the if you can say this at the end of the episode,

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then you have succeeded statement is "I now know better

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what generally affects the stock market and what generally

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doesn't."

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Gardening is something that I have taken up actually, in

Joseph Okaly:

recent years. I had tried it when I was young, I was terrible

Joseph Okaly:

at it, had very little success. And it wasn't until I was

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exposed to my father in law's garden that my interest became,

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you know, sparked again, and brings me to today. To me, I had

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kind of always thought that the only thing that was needed when

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it came to gardening was full sunlight and plenty of water and

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anything should grow, right? I mean, in school when I was

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growing up, and you learned about plants, that was the basic

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gist even now when I watch Sesame Street with my kids, it's

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what do plants need sunlight and water? And that's it, you see

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the sun come out and the flowers, you know, they just pop

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right up. What I learned, though, is that while those

Joseph Okaly:

things are, you know, important, they're not the most important

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many times. Sure plants need water and sun, but a plant in

Joseph Okaly:

the wrong type of soil is going to struggle and most likely die

Joseph Okaly:

regardless of how much water and sun gets. If the soil is too

Joseph Okaly:

heavy or too loose, the roots aren't going to do well. If the

Joseph Okaly:

pH is off, the plant literally won't be able to get the

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nutrients it needs out of the soil. That was like wild to me

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how if the pH is incorrect, even if those nutrients may be there,

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the plant won't be able to absorb them properly with an

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incorrect pH. So the soil really is this all important element.

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And if you think all the way back to learning about the, you

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know, the fertile valley in history classes, it was that

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good soil that was renowned. And I mean, many plants out there,

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they don't even like full sunshine or lots of water. And

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so after you learn it, you're like, "Oh, hey, yeah, that makes

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a lot of sense."

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So when we speak to clients around election time, they're

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concerned about who is going to get elected in respect to the

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stock market many times. And it feels like this is the

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predominantly important water and sunshine. Concerned in

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general, I totally get. You want the person who you think is best

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running the country to be obviously going to win the

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election. When it comes to the stock market, though it

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historically doesn't really care one way or another what

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political party is in office. And so since we have clients

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that lean both ways, we tend to get about 50% of our clients

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calling us during any one election. Studies have been done

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on the President, the House, the Senate, and a combination of all

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three of these things to try to see which is the most favorable

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to the stock market. So maybe a Democratic president but split

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Congress, maybe a Republican president and a democratic, you

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know, Congress. All these different combinations. And what

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they found after what I'm sure was a lot, a lot of work, a lot

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of time is that there is no strong correlation for any

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particular combination over the long term. So the most common

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thought we have is "oh Republicans are supposed to be

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good for business. So Republicans should mean a better

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stock market." And statistically when they look back at it, that

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is not true. There really is not anyone really strong correlation

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that you can point to and say, Ah, ha, we want them to be in

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office for the economy.

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What the stock market tends to be influenced by more than

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anything, though, is the certainty versus uncertainty

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factors that we've brought up a number of times. It is a leading

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indicator, which means it's acting now based on what it

Joseph Okaly:

thinks is going to happen in the future. If a company comes out

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with a state of the art product, its stock would likely jump up,

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not because it's actually sold any of those products and

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actually made money off of those products but because the stock

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market thinks it is going to make more money, thinks this is

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going to happen in the future. Now, if the product winds up

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blowing up, the stock will subsequently drop, because it's

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saying they think this company is going to post really bad

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earnings, but again, in the future. If you think back to the

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last few significant events, you have COVID in 2020, you have the

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financial crisis back in 2008. With COVID global pandemic, you

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obviously had a ton of uncertainty on what was going to

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happen. Once this started to get clarified, hey, here's the plan

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of action, you saw things start to reverse course. And the

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market actually ended significantly up by the end of

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the year. In 2008, you saw major financial institutions like

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Lehman Brothers going under, others in significant jeopardy

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and so again, huge amounts of uncertainty. Once there was a

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plan of action, bailouts, and otherwise, you know, you saw

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this again, start to reverse course. So higher degrees of

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perceived certainty, is that fertile soil?

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So am I saying that government policy has no part in what

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affects the stock market? No, of course not. The plants do still

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need some water, they need some sunshine. And you know, even if

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it may not be the most important factor per se, what political

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parties may win or lose in general has historically, like

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we said, not been something worth getting upset about. But

Joseph Okaly:

based on each individual administration's policies, and

Joseph Okaly:

what they put into play can certainly affect how the stock

Joseph Okaly:

market reacts to that news is, do they think this will increase

Joseph Okaly:

the growth of companies? Or do you do they think will be, you

Joseph Okaly:

know, a hindrance to the growth of companies?

Joseph Okaly:

As we get to the end of this episode, let's circle back

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around to the goal statement. If you can say "I now know better

Joseph Okaly:

what generally affects the stock market and what generally

Joseph Okaly:

doesn't", then you have succeeded in the main takeaway

Joseph Okaly:

from today. Congratulations.

Joseph Okaly:

Thanks for tuning in today and join us for next week's episode

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called Hollywood's Stock Market, where we're going to break down

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how what you are shown in movies and TV creates a big part of the

Joseph Okaly:

basis for that uneasiness around investments today in my opinion.

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Overall, if you're able to implement what we covered today,

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as always fantastic. Bravo. You have less to worry about them

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before and you can focus more on enjoying life. If you are

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wanting help with these things, though, or have questions you

Joseph Okaly:

need help in clarifying, check out that Ask Joe section on the

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show's website EnjoyMore30s.com. That's EnjoyMore30s.com. You can

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also connect with me directly by visiting my wealth management

Joseph Okaly:

firm New Horizons Wealth Management at nhwmllc.com. Until

Joseph Okaly:

next week, thanks for joining me today and I look forward to

Joseph Okaly:

connecting with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax, or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer, or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor Member FINRA/SIPC.

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