Overall, what the market tends to be influenced by is certainty vs uncertainty.

• Studies have been done on the president, the House, the Senate, combining all three of these in different ways to see which one of those has been the most favorable to the stock market in past history. And what they found after what I'm sure was a lot of work is that there is no strong correlation for any particular combination over the long term. (03:19)
• One strong positive indicator, however, is the midterm elections themselves. So not who wins the elections, but the elections themselves. (03:56)
• Going back even further to 1950, if we look at every 12 month period, immediately following the midterm election date, it has been positive. Every single one going back to 1950 with an average of 15.1%. (04:23)

Quote for the episode: "Overall, what the stock market tends to be influenced by more than anything is certainty versus uncertainty." (05:01)

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Welcome to the Enjoy More 30s Family Finance

podcast. The only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

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

from simply enjoying life.

Hello, and welcome to the Enjoy More 30s Family

Finance podcast, REMIX for Rising Rates. In 2022, there

have been significant declines across pretty much every major

asset class through October. With rates rising significantly

for the first time in a long time, it can be quite an

unnerving experience to say the least. This series is going to

attempt to help you with that going back and re-mixing a

number of past episodes to help you emotionally navigate what

have been pretty turbulent times so far in 2022. Each week, I'll

be re-mixing a different episode bringing what I would say are

timeless concepts back into focus in the present day

situation. As always, before I begin, please share in light

please reviews. I'd love to reach and help as many young

families out there just like you.

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

Political Parties - REMIX, which may sound like it doesn't make

much sense. You know, how could these seemingly diametrically

opposed groups that are influencing pretty much all of

public policy not cause the stock market play favorites?

During this original episode back in season 7 that I shared,

I opened with a story about gardening. And gardening is

something that I have taken up in recent years, it's something

that I really enjoy outside of here. And I tried it when I was

young, very little success very little. And it wasn't until I

was exposed to my father-in-law's garden that my

interest my kind of potential passion for it became sparked

again. And to me, I had always thought that there were only two

things that really plants would need; full sunlight and water.

And everything should just grow if they had those two things,

right? I mean, if you're in preschool, what does the plant

need? Sunlight and water! You see the sun come out, and the

flowers just pop right up. What I learned, though, is that those

two things in water and sunlight, they a lot of times

aren't even the most important thing that a plant might need.

Sure they need the water, they need the sun, but a plant in the

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

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

heavy, too loose, the roots won't do well. If the pH is off,

the plant literally won't be able to get the nutrients it

needs out of the soil. The soil is this all important element.

And if you think all the way back to the learning that we

probably all had about the fertile valley, it was the good

soil that was renowned. I mean, many plants out there don't even

like full sunshine or lots of water. They're a little water or

full shade. You know, there's all different plants for

different types of situations. And so after you learn it,

you're like, "Yeah, this makes a lot of sense."

So when we speak to clients around election times, they are

concerned about who's going to get elected in respect to the

stock market. It feels like this is the predominantly important

water and sunshine like with the plans. Concerned in general, I

certainly get. Obviously everybody out there wants the

person who they think is best running the country. 100% makes

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

historically doesn't really care either way. Studies have been

done on the president, the House, the Senate, combining all

three of these in different ways to see which one of those has

been the most favorable to the stock market in past history.

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

that there is no strong correlation for any particular

combination over the long term.

So how this applies to 2022 is that we recently had midterm

elections, and you may be unhappy or you may be happy with

how that turned out. Either way, though, you now know the market

has not historically cared one way or another, which party

controls what. One strong positive indicator, however, is

the midterm elections themselves. So not who wins the

elections, but the elections themselves. Going back to 1962,

so quite a ways, there's been a market drawdown in every single

midterm year with an average correction of 19% down. So 19%

loss on average. The average recovery has been 32%. Going

back even further to 1950, if we look at every 12 month period,

immediately following the midterm election date, it has

been positive. Every single one going back to 1950 with an

average of 15.1%. Excuse me, I almost lost a piece there.

15.1%. So there are never any guarantees when it comes to

looking at past results. I mean, that's the standard investment

disclosure, "past returns do not guarantee any future success."

But at the same time, it would be prudent, I think, to say to

at least be aware of such strong core correlations for sure.

Overall, what the stock market tends to be influenced by more

than anything is certainty versus uncertainty. It's a

leading indicator, remember, which means it's acting now

based on what it thinks is going to happen in the future. If a

company comes out with a state of the art product, the stock

probably will jump up. Not because it's actually made more

money on this state of the art product yet, but because the

stock market thinks it's going to make more money on it. Thinks

this is going to happen in the future. Now, if the product

winds up blowing up, the stock will subsequently drop because

it's saying they think this company is going to post really

bad earnings. But again, it's in the future. It's what they

think. So am I saying that government policy has no part

whatsoever in how the stock market is affected? No, of

course, I'm not saying that they have no effect at all. The

plants still do need some degree of water and sunshine, even if

it may not necessarily be the most important factor. But what

political party may win or lose in general has historically not

been something worth getting upset about either way. Midterms

on the other hand, have shown again, that very, very strong

positive correlation following the midterms.

So thanks for tuning in today and join us for next week's

remix episode, Step Up, The Gain Is Gone - REMIX. While this

original episode spoke about inheriting assets with large

gains, what we're going to do is expand this to gains in general.

And what you may want to look into for your own portfolio with

likely declines so far across the board in 2022. As always,

please remember to review and share for others and if you need

any help, don't hesitate in reaching out. I probably have

helped someone just like you. Till next week. Thanks for

joining me today and I look forward to connecting with you

again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

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

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer, or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

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

Registered Investment Advisor, Member FINRA/SIPC.