How To Prepare For The Falling Stock Market

What I’m doing to prepare for the stock market during the election

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This is how to prepare for the stock market during the election and understand exactly what’s going on.

First, on Wednesday alone, we had the S&P500 fall by 3.5%. That is the the worst day that we’ve had since June. What’s different about this week is that we’ve had all 3 indexes go down in unison, including the DOW Jones and the NASDAQ. What we learned this week is that no investment is 100% safe – not even investments that are considered defensive.

For example, gold and silver were down this week. Digital currencies were down this week. Even tech stocks which we’ve learned do really well, lost value as well with Tesla down 4.3%, Facebook 5.5%, Amazon 3.7%, Apple 4.6%, Google 5.5% with the exception of Netflix.

All of this is happening because of 2 main reasons:

Reason #1, winter is coming, and the numbers are very real. Only 42% of people that were polled are comfortable going out to eat, 36% are comfortable going to a mall, only 33% are comfortable going on vacation which is also a reason why stocks like Carnival Cruise are down double digit percents, only 23% of people are comfortable going to the gym or the movies, and only 15% are comfortable traveling abroad ( source: ) As a result, 57% of people are saying they are considering restocking their supplies which might mean worse economic conditions for businesses.

Reason #2 elections which play a lot less of an important role in the stock market than people think. Since 1977 the economic growth rate average has been around 2.7% for the Republicans, and 2.9% for the Democrats. So it’s about the same regardless of which party comes into office but historically the market peaks 1 week before which is exactly where we are at. If you’re worried about your investments, your IRAs and 401k’s the most important factor to consider is not the election but rather – Congress. Here is some really interesting historical data dating back from 1950, all the way to 2019 (results include several years of the S&P 90 because the S&P 500 wasn’t invented until 1957)

Under a Democratic Congress, the S&P500 has averaged around 10.7% yearly returns. Under a republican congress, the S&P500 has returned 13.4%, that may not sound like that’s a substantial difference, but 2.7% per year over the course of 20, 30+ years is a huge huge difference, here is an example. If you started out with $100,000 and kept it in VTI, you would have ended with 4,349,022.32 under a republican congress versus 2,110,710.28 under the democratic one. But the best results have been under a split congress which returned 17.2% (more specifically the best combination has been a democratic president with a republican congress mix).

If we have a blue wave victory which could lead the stock market downward in the short term, here are some important things to consider and mistakes to avoid when investing.

#1 Don’t stop investing. I did a podcast with Graham Stephan where I showed quite a bit of cash but my situation is a little unique, unless you have a huge tax bill due or trying to buy some real estate, then continue investing.

#2 Follow the Fed and monetary policy. During the Bush Senior and Bush Jr. administrations, the stock market didn’t do too well. When the fed tightens up, the stock market doesn’t do as good. Alternatively, Clinton and Reagan did really well because of falling interest rates which happens when the Fed loosens up which is what we’re doing now, the stock market is very much supported by fed monetary policy so watch it closely.

#3 Regardless of who is president, the stock market does not care. Do not make the mistake of being what’s called a partisan investor. If you were to start investing in 1896, you would have ended up with significantly less money if you were waiting for your candidate to get elected versus investing the entire time.

Further research:
10 Truths No Matter Who Wins:
Keys To The White House:

*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.


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