Election and Markets
With the election just a few weeks away, we’re seeing a lot of polls come out. And naturally, they’re going to show different things, so it’s hard to know which ones to trust. Here, we don’t lean politically one way or another. We believe that certain sectors do better under different political regimes, and that’s where we try to position ourselves. We aren’t taking sides—we’re just looking at the data and focusing on the facts.
We use several market indicators to try to predict where things might be headed, as opposed to just relying on polls. There are four key indicators that we and our research partners use:
The Misery IndexThe S&P 500The US DollarThe Volatility Index (VIX)Below is a breakdown of these indicators:
The Misery Index is the unemployment rate plus the inflation rate. It’s predicted 15 of the last 16 election winners. If this index is above 7.35, it tends to favor the challenging party; if it’s below, it benefits the incumbent party.The S&P 500 is straightforward: if we’re in an uptrend heading into the election, it’s good for the incumbent. A downtrend tends to favor the challenger.The US Dollar: A strengthening dollar usually helps the challenger, while a weakening dollar benefits the incumbent.The VIX (Volatility Index) measures market volatility. If volatility spikes earlier in the year, it’s better for the incumbent. If volatility spikes closer to election time, it tends to favor the challenger. The VIX has accurately predicted the last eight presidential elections since 1992.These are just some of the data points we rely on, especially when there’s so much conflicting information from polls and news outlets. We’re paying attention to what the market is telling us.
With polling, you often find that people aren’t entirely honest. Plus, it’s harder for pollsters to reach people these days—people aren’t as responsive to phone calls or door-to-door interviews like they used to be. Pollsters are struggling to figure out how people will actually vote. Looking at the market data removes some of that uncertainty. It shows us where people are putting their money, which can be a more reliable indicator of how they feel about things. People can say all kinds of things, but where their money is flowing—that always tells the truth.
President and CEO
Wealth Consultant
Associate Vice President
Wealth Consultant
Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
The post What The Market Is Telling Us first appeared on Fi Plan Partners.