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The Impact Of The President On The Economy And Market

| October 15, 2018
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No matter how divided the headlines make our country seem, there’s one thing on which just about everyone can agree. It’s that our current president elicits strong emotions.

Whether you loathe the man or are one of his biggest fans, watching his administration probably makes you wonder how his decisions affect the economy and markets. How much power does the president really have over such things?

What History Shows Us

The truth is, not much. We are experiencing the longest bull market in modern financial history, and it is not because of President Obama—neither is it because of President Trump. In our country, economic success is not dependent upon any one person. And that’s a really good thing.

Let’s take a look back at Nixon’s time. When he resigned after being threatened with impeachment, there was a sharp drop in the stock market. But was that the cause? When that happened, stocks were already being pulled down by a global oil shock, runaway inflation, and turmoil in the Middle East.

What about Clinton? He also faced impeachment. Did it have the same effect? Hardly. The S&P 500 continued its upward trajectory in spite of the impeachment proceedings. Why were things so different?

What Really Matters For The Economy And Market

Clinton’s impeachment trial did not impact the stock market because when it happened, America’s economic fundamentals were strong. That was not the case under Nixon.

You see, what matters most for the economy and market is not any individual executive, but the strength of our institutions. History has shown us that if a country has an independent judiciary and central bank, free and clear elections, and a well-functioning tax system, it’s nearly impossible for any one leader to run it into the ground. The absence of these institutions is what enables leaders to have extreme economic power. Then their mistakes can lead to economic devastation.

Basically, the stronger the institutions, the less power a leader has over the economy and markets. Luckily, here in the USA, we have strong institutions. After 200 years and 44 transfers of power, we have seen that the president has a remarkably limited impact on our overall economy, especially in the long run. Strong institutions can withstand even poor leaders.

What Happens Next?

There is no guarantee that a potential Trump impeachment, as many people are calling for, would not impact our current bull market. However, our economic fundamentals are positive and political institutions are strong.

That means that as an investor, you don’t need to worry about our current political turmoil and sensationalist headlines. There may be ups and downs in the markets, but our long-term outlook is good. It doesn’t matter who the president is; as long as you invest wisely for the long run and personalize your portfolio to your own specific risk tolerance and goals, you shouldn’t have to worry. If you are worried, give me a call at (626) 529-8347 or email me directly at [email protected] and we can discuss your specific situation in more depth.

About Haydel, Biel & Associates

Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at [email protected].

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