We have figured out who will win the election. 
The people we serve often ask us how the upcoming election will impact their investments. While many seem to have strong feelings about one or both candidates, ultimately we see this as an economic question and so we always attempt to offer an economic answer. And in that regard, we don’t have major economic concerns regardless of who wins. Trump’s “America First” policies (lower corporate tax rate, fiscal deficits, trade tariffs, etc.) have generally proven to be good for the economy (and for stocks), and during Biden’s first term, he has mostly kept those policies in place.
But enough chit chat. You want to know who will win the election so let us tell you: American Corporations. It’s an easy prediction to get right as they have been winning in a landslide since the Reagan era. It’s an impressive streak!
This is good news, especially If the majority of your liquid net worth is in stocks and bonds – as it is for most of the people we work with and for most Americans. To put context around this, the S&P 500 has achieved compound annual growth of 11.6% since the Reagan era. $1,000 invested in 1980 is worth $120,970 today.
In our highly polarized political system, it’s easy to lose sight of the truly bipartisan issues, but corporate wealth creation is at the top of the list. Sure, there will always be grandstanding over how utility companies should be regulated or whether Apple has an unfair monopoly, but that’s a distraction from the bigger point: the deck is stacked massively in favor of American Corporations to make lots of money.
What’s also good news is that the stock market has democratized this beautifully. In many countries, only the elite own businesses, but in America, more than half the citizens own at least a small share of Corporate America through their 401(k) plans and brokerage accounts.
So why do corporations keep winning? In spite of what the headlines say, America still has some good things going for itself:
- As the world’s dominant superpower, our corporations get to operate their businesses spanning the globe.
- An educated and talented workforce
- Well-functioning capital markets
- Generational wealth
- Cheap access to capital through our sprawling banking system
- The dollar remains the reserve currency for the world
The stock market does not go up every year and if Warren Buffet can’t predict the market in the near-term, then we won’t attempt to either. But that’s also missing the bigger point. So at the beginning of what will hopefully be a fruitful playoff run for the Celtics, let me offer a sports analogy.
Will Jayson Tatum win tonight’s game? Maybe.
Will Jayson Tatum and the Celtics win the Championship? They have a good chance to go far.
Will Jayson Tatum win the majority of games in his career? That seems very likely because he’s a great player.
When we are talking about American Corporations (and their associated stocks), our game plan is to get the third question right. Will corporations keep winning and the stock market be higher in 20 years? Nothing is for certain, but the deck certainly seems stacked in favor for that to happen.