As this edition of TGIF 2 Minutes was written prior to the first US Presidential debate, one piece of the “proof” will already be in the pudding for readers post-debate on Friday morning. Though not much should matter to markets related to the debate.
For the sake of thought and discussion elections can matter to stock and bond markets in the short- to intermediate-term. Debates – and State of the Union speeches – may (and may not) matter in the short-term as well. Big-picture policies like taxes, healthcare (drug prices and insurance coverage), social security, Medicare policy, government spending and more… these are all mentioned in presidential debates and speeches.
It may be that US Presidents were more transparent, direct and meant to educate in decades of old – meaning that what was said really became policy or was discussed and voted on to establish policy – whereas today with 360-degree constant media, debates and speeches include a greater number of mere talking points (that sell media advertising dollars and are meant to sway and manipulate voter psyches of all intelligence levels).
None of this is meant to sound cynical. Debates and speeches are an opportunity for the candidates and speakers to sway public opinion. Markets will always take into account such current news and information with related “data” reflected in short-term stock prices and interest rates. In the bigger picture, though, it is probably not a smart idea to use one election or series of debates or events to make investment decisions.
A handful of recent examples for consideration:
- the 2016 US Presidential election and aftermath
- the June 2016 Brexit referendum
- the 2020 US Presidential election and aftermath
- Russia’s invasion of the Ukraine in early 2022
Note that more than any of these events, it was specific financial crises, recessions and economic booms that mattered in far greater magnitude to stock and bond markets. The 2016 and 2020 US elections, Brexit referendum and 2022 Russian invasion did not affect markets in a predictable way.
Fast forward to the 2024 US Presidential election and related upcoming debates. If past experience is any indication, actual future government spending and global interest rate policy will weigh in on stock and bond markets to a greater extent than any sound bite, excitement or anxiety created by a candidate or political party in a series of debates or a specific election.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.