It used to be that every four years, the party out of power, would announce to us that “This is the end of the world, as we’ve come to know and love it.” Now it has become a continuous rant. Just in case a few of the younger ones among us are not yet aware, let me be the first to inform you that the world seems to continue, no matter what any particular government does, even if a few of us are sacrificed along the way. By and large, democracies seem to be the most ineffective in actually changing our circumstances (which to me, might be their most appealing characteristic.) The import of this is that waiting for government to effect real change in your life, might be the modern equivalent of “the opiate of the masses.” Really? Don’t tell me I’m the first to mention to you, if you want change, first change yourself.
So what’s this to do with stocks? Well, I will concede that there are occasions when political decisions, more importantly, the anticipation of those decisions, can effect the market. But looking back on those occasions, it is clear that they effect the market less, and for less time, than how the economy is doing effects the market. And as I said in the first paragraph, the government only effects the economy on the periphery. As much as George II might have despised John the Pain, do you really think that he would wish to go down in history as “the guy who trashed the place?” or, if he could, would he have done something to make the economy better before leaving office. I have no doubt that the present occupant, would wave the magic wand if he could, but he can’t. I certainly think that the two presidents, the congress, and the federal reserve did everything in there power to avert having us ‘go over the cliff’ four years ago. But for all their efforts, it seems that the major result was that it was not the end of the world. But as I noted above, that result, although often predicted, has yet to happen.Again, so what about stocks? Well, worrying about how an election, or a piece of legislation, will impact a stock, most of the time will not tell you much about the long term prospects of the stock. I am not going to deny that a company like Boeing is greatly helped by the extensive government contracts that it gets, but if they didn’t make a product that was deemed to be desirable (now, and in the foreseeable future), they wouldn’t be on my radar screen. Whether a company survives usually is most closely linked to whether they make a product or service that is desirable. Whether they do well, usually is linked to whether they do it better than their competition.