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GreenStar Monthly Newsletter Excerpt – December 2020

GreenStar Monthly Newsletter Excerpt – December 2020

Which Party has better Stock Market Performance?

With each election, roughly half of our clients are happy about the results and the other half are not. A few weeks ago, we met with a client who was brooding about the election results and we sought to assure him that the party in power has very little to do with stock market performance. We have said this for years and in our experience, most people are taken aback by this.

To make the point, we created a fun test for him. We printed off a line graph of the stock market performance (Dow Jones) during the last four two-term presidents (Reagan, Clinton, Bush, and Obama). We asked him if he could match the presidents to the performance lines. We thought it would be fun to recreate the exercise here. Can you identify the presidents in the performance chart below?

The answers come up after about 30 seconds. We’ve found that generally people are surprised by the results. We could take this back 100 years and look at the stock market performance during all presidents. In the chart below you’ll see two different groups of lines flashing on and off. Can you identify which group is the Republicans and which is the Democrats?
The long Roosevelt line gives away the Democrat group. There isn’t a notable performance difference, however for many folks there is a huge different in perception. President Trump isn’t exactly shy about tying stock market performance to himself, thus far his results (+50.9% with six weeks to go) are very similar to Gerald Ford (+40.6%) and George H.W. Bush (+41.3%). This was true even prior to the pandemic.

You can play around with this line graph here.

America’s greatness has never been its politicians. While government policy definitely effects business decisions, excellent business know how to adapt to various environments. In every challenge is an opportunity.

Some Good News

Throughout 2020, the biggest threat hanging over the economy was the pandemic. Were someone to snap their fingers and make it go away, whole industries would snap back and millions of jobs would return. Over the past few weeks, it seems we’ve heard a snap in the distance.

Several vaccines have come forth with 95% efficacy. This is far greater than predicted and gives a lot of hope for near term normalization. Also, we got news that immunity may last years (Source). It cannot be overstated how wonderful this second part is. Based on other coronaviruses, there was great concern that immunity may last only a few months. This would have made global herd immunity nearly impossible.

These two things are clear signals of the beginning of the end. It feels like such a long time ago when life was normal. It’s hard to imagine that perhaps soon social distancing signs will be taken down and we will see each other’s faces.

We’re all prone to myopia. It’s easy to forget that all the humans are dealing with this same thing. Our hope is that this global collective experience and triumph will bring us together to fight other common enemies whether microscopic or not.