By CAROLYN MCLEMORE, CRPC®, and KURT VANDE STREEK
5 financial lessons from 2020
and the upcoming election
We are just a month away from the 2020 presidential election in what has been an unprecedented year.
On February 19, the S&P 500 reached an all-time high. At the end of February, the United States had just 24 confirmed cases of COVID-19.
By March 23, just 33 days removed from all-time highs, the stock market had retreated by 34 percent. Yes, you read that correctly. The S&P 500 decreased by 34 percent in 33 days. By the end of March, the United States had 188,724 confirmed cases of COVID-19 — a nearly 8,000 percent month-over-month increase.
So, what has 2020 taught us about investing and financial planning?
◼︎ Market volatility is normal.
Price fluctuation comes with the territory when investing in the stock market. The good news is, there are several solutions outside of the market if volatility doesn’t interest you.
◼︎ Time in the market is more important than timing the market.
Investors who remained invested in the broad market past February and March were rewarded. The S&P 500 is back near all-time highs again. Trying to “time” when to get in and out is a calculated gamble at best.
◼︎ Portfolio diversity can help reduce investment anxiety.
Understanding your risk tolerance and investing accordingly can help emotionally ground you during times of high market volatility.
◼︎ Emergency savings are critical, especially during uncertainty.
Tens of millions of jobs were lost or furloughed during the first half of 2020. Those who had three to six months of cash on hand fared significantly better than those who didn’t.
◼︎ A good plan today is better than a perfect plan tomorrow.
If you don’t have a financial plan, or the one you did have proved unreliable this year, it’s time to roll up your sleeves.
Now, as we turn our attention to the November 3 election, opinions about each candidate are not lacking. Politics is not our cup of tea and shall thankfully remain that way! However, we do want to shed light on what history tells us about the stock market’s performance under Republican and Democratic presidents. What it reveals may surprise you.
Below is a list of every president dating back to John F. Kennedy, and the performance of the S&P 500 index during their time in office:
- John F. Kennedy (1961-63) 12.4%
- Lyndon Johnson (1963-69) 10.3%
- Richard Nixon (1969-74) -1.6%
- Gerald Ford (1974-77) 18.1%
- Jimmy Carter (1977-81) 11.7%
- Ronald Reagan (1981-89) 14.7%
- George H.W. Bush (1989-93) 15.7%
- Bill Clinton (1993-2001) 17.2%
- George W. Bush (2001-09) -2.9%
- Barack Obama (2009-17) 14.5%
- Donald Trump (2017-Present) 12.2%*
*as of 6/30/2020
1 All index data from FactSet. The S&P 500 Index is an unmanaged index which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.
Our acknowledgement of historical market performance is not a voting recommendation. What we are attempting to emphasize is the fact that stocks have performed well over the long run under both Republican and Democratic presidents — and that should offer investors comfort in terms of the stock market. Yet there is more at stake in presidential elections than money and the performance of stocks.
In closing, we encourage you to reflect on the five lessons we have shared and ask yourself, “How can I strengthen my mindset and/or financial plan?” Many people desire financial freedom but lack an actionable plan to pursue it.
Our team at Trustmark Financial Services would welcome the opportunity to come alongside you on your journey toward freedom. We can be reached at 769-209-4684 or 601-208-6029.
Carolyn McLemore is a financial consultant and first vice president with Trustmark Financial Services. She and her husband, Gary, live in Brandon and are active members of First Baptist Church of Fannin.
Kurt Vande Streek is a financial consultant with Trustmark Financial Services. He and his wife, Mary Ellen, live in Jackson with their two children and are active members of Redeemer Church, PCA.