Redrick Terry:
It is 4 Your Money time and we’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.

David Nelson:
Hi Redrick. Thank you very much.

Redrick Terry:
Of course. So we’re quickly approaching the 2020 election. Things certainly interesting this year. What impact does the election have on the financial markets?

David Nelson:
Well, certainly there’s a lot of talk as far as what’s going to take place. None of us really know for certain on that front, but what we think we’re going to see is going to be an enormous amount of volatility. Now, we always like to look back and look at historically what’s taken place and unfortunately in this space, there’s not a lot of data points as far as to look at.

David Nelson:
So, what I’ve done here, I brought along a chart and we’re going to focus on stock returns, whether the incumbent wins or loses. That’s what this chart is hoping to accomplish. Now, people should start with a black line as the benchmark and it has a bias as far as this is looking at returns, as far as in a year of elections.

David Nelson:
What you see as far as by the black line is that the trend-line at the early stages, we see it starting to drop a little bit and then at the end of the year it’s rallied, so that’s the average.

David Nelson:
Now, what we’re also going to look at as far as if the incumbent wins. Regardless of whether it’s a Democrat or Republican, when the incumbent wins history says, and again, there’s very few data points to look at, but that’s the dark blue line showing a pretty significant move as far as upward.

David Nelson:
The blue line that’s the dashed blue line is showing if the incumbent loses. And then the orange line is looking at this year as far as what’s already taken place. So it’s been a bizarre year to say the least with the shutdown that we’ve had as far as with the markets, what have you, or as far as the economy reflected in the markets.

David Nelson:
So again, time will tell as far as whether this is going to hold, but generally speaking, this has been the trend.

Redrick Terry:
Yeah, certainly a unique year, 2020 so far. So what else should we take from this type of analysis?

David Nelson:
So, I think there’s two items. It’s counter-intuitive as far as when we talk about it, but what’s taken place when the incumbent loses is industrials and financials generally do well. And the reason for that historically has been that the economy, if they lose, the economy is generally in pretty tough shape and industrials are a big beneficiary with a new president as far as coming into office. So, that’d be probably the key item there.

Redrick Terry:
What should investors’ expectations be talking about November and beyond post-election?

David Nelson:
So, we’re short on time here. So no surprise that we’re going to have lots of volatility and the biggest takeaway is be prepared for it. Know what you own and know how much volatility that you want to have in your portfolio, how much you’re going to have in your portfolio and if you’re comfortable with those levels.

Redrick Terry:
Good advice as always. David Nelson, thanks so much for joining us.

David Nelson:
Thanks, Redrick.

Redrick Terry:
And if you missed any part of our discussion, we’ll make it available to you at OurQuadCities.com.