“I’m not afraid of storms, for I’m learning how to sail my ship.” by Louisa May Alcott, a novelist of the 1800’s, known by most for her book titled, Little Women.
And you might be wondering, “This is relevant to investing how?” Unless you live under a rock you know this one, “fear of the unknown”. It’s no different than a child sleeping with a light on because of fear of what they cannot see!
Bringing this a little closer to our wheelhouse, two words are never far apart, FEAR and GREED. Emotions are powerful, especially when they are on opposite ends of the spectrum and they are the #1 reason why people fail at investing. They never learn how to sail the ship!
But I digress. I simply wanted to set the table for the main attraction!
It’s mid-November and the elections are thankfully behind us, QE has ended, earnings season is winding down and the silly season is near. These all have implications for the markets. First the mid-terms that changed the makeup of the Congress. Politics matters because the rules and regs come from DC and businesses, large and small, so plan accordingly. Without getting into the weeds, the 2015 changes in DC means there is hope we will see favorable changes in tax policy and less onerous regulations for sectors that affect jobs and wages.
The Fed has ended QE and the market has not collapsed. But more importantly the looming dangers of unknown are behind us and did I mention that stocks do quite well in the years following the midterms? Other than the two years that lead up to the financial meltdown in 2006, our stock market has never gone down during that 2-year period. We call that a powerful trend! Better yet, it doesn’t matter who is in Congress or the White House. Hold on to your hat for even better news! Stocks have done the best when the Congress is in Republican hands and the President is a Democrat.
History is on the side of investors in equities (not bonds) but I would be remiss if I didn’t state the obvious–past performance is no guarantee of future results. However, there is no reason to think that the midterm trend will not continue because the cloud of uncertainty over elections is gone. There is a smidgeon of hope that something good will happen with respect to the Keystone Pipeline, Corporate taxes, etc.
Let’s suppose all that happens is gridlock? Markets happen to like gridlock because it means that more harmful regs will not be imposed and businesses are okay with that. We go into 2015 knowing that Congress and the President are at odds but history tells us the market performs better when there’s a political stand off because it means businesses can operate with more certainty.
What does that mean for you, the investor? Learn to sail your ship and don’t fear the storms! Learn that you can do well by using BuySelliQ to find quality ETFs and stocks and then follow the rules. Pay attention! Keep your lists current and learn how to use the tools (like Quality Score) to keep you on the right side of the market. If you get a RED Dot, SELL your position. Know that markets anticipate events! We are entering a historically and seasonally favorable time of year!
Be confident. Use control and then confirm! Always Trust the Dot®.