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What Do I Do About One-Party Rule?

Hey everybody.  Here’s a question that’s coming up a lot lately.  What should I do with my investments if the Democrats control both chambers of Congress as well as the Whitehouse?  

It appears that’s just what’s happening with Democrats winning both runoffs in Georgia.

They’ll have the White House and the House of Representatives.  And with a 50-50 split in the Senate, a deciding vote goes to Vice-President Harris.  And I think I know which way she decides.

It’s not necessarily a slam dunk for Democrats to wrangle legislation their way.  There may be enough moderate Democrats who won’t rubber stamp every Biden proposal.

Putting politics and culture aside for just a moment and looking strictly at this from a financial and investment perspective, I’d say Wall St certainly prefers a more business friendly environment than a Democrat administration typically offers.  

By most metrics, President Trump engineered what was arguably the best economy ever coupled with record setting highs in the stock market.  Turns out that corporate America likes less regulation and less taxation.  Who wouldn’t?

What Wall Street likes even more is certainty.  Now that uncertainty has been removed, corporate America can get on with the business of making money. The CEO’s of the best financed, most profitable, well run companies in America will figure out how to do that in any political environment. 

If history is any indicator, and it’s not always, but it’s all we’ve got, the stock market should do just fine.  The last seven calendar years that Democrats controlled both houses of Congress, the S&P 500 was up six of those.  The exception was a 1.5% loss in 1994 during Bill Clinton’s run.

If we go all the way back to 1951, when Harry Truman was President, and looked at the years Democrats controlled Congress, the S&P 500 was up nearly 78% of the time.

So back to the question, what should I do with my investments.  Don’t do anything.  At least not based on who’s in charge in DC.  

Remember Rule #2 of the O’Grady Investor’s Creed.  The “crisis du jour” has no impact on my long-term financial goals.

And then recite Rule #3; Financial media peddles in short-term advice.  I’m a long-term investor and don’t succumb to short-term advice.

(For a copy of all 7 Rules of the O’Grady Investor Creed, click on…or go to the website)

If it’s any consolation, on the political and cultural front, one-party rule by the Democrats has not lasted long. The two times it occurred over the last 40-years, it was short-lived.  Only lasting two-years in 1993/1994 and 2009/2010.