By Michael Osteen
At a seminar we gave in August in North Carolina to a group of investors, the question on what affect a Clinton or Trump presidency could have on stocks was asked by a participant.
My first response was that to date both of their policies are too vague to make any logical type of determination.
As with each U.S. presidential election, there is a lot of uncertainty about what the outcome will be and how it will affect the market. This question comes up every four years. But when you explore it all, it appears to contain a lot of contradictions.
Here are a couple of examples:
A global chief investment strategist for BlackRock said, “Over the past century, which party occupies the White House has no discernible or consistent impact on the U.S. equity markets.”
In contrast, T. Rowe Price says, “Presidential election years generally have coincided with favorable markets, particularly when the incumbent party wins.”
So there you have it. It is a clear as mud.
However, history does show us that when the U.S. government implements policies that change from the existing ones, that sometimes those very changes can create opportunities for retail investors.
These types of items are typically referred to as “geopolitical events.”
It seems just about each quarter or year that investors are faced with uncertainty and difficult times, which play havoc on the stock market.
For example, in August 2015 the Shanghai Composite (China) fell 11.5 percent and for the same period the Dow Jones sank more than 1,000 points in a week, which was the worst five day event since 2011 as reported by CNN.
Even though neither occurred due to changes in the United States, each had an impact on our stock market just the same. Both events were created due to some type of “geopolitical event.” Therefore, a “geopolitical event” can occur if the event is a domestic or foreign born.
At Port Wren Capital, LLC we look for information relative to undervalued companies with the potential of above-average gains over the long-term.
Therefore, we found that when certain “geopolitical events” do impact the market that may offer the retail value investor an entry point into the market.
To that end, we noticed due to the “financial crisis” of 2007-2009, the federal government made changes to the monetary and fiscal policies to lessen the shock to the economy. This change in policy created an unpredictable “geopolitical event” that impacted the financial service sector.
Thus, we conducted our own independent security research back in 2013 and found and bought shares of a company in the financial services sector and later sold them in 2016 with an average realized gain of 36.4 percent.
In summary, it’s not which presidential candidate gets elected. In my opinion, there is no correlation to the person sitting in the White House to the U.S. stock market. Wait to see if a “geopolitical event” occurs as a result of a policy change that has an impact on the stock market.
Michael Osteen is chief investment strategist with Port Wren Capital LLC serving the greater Beaufort County area. Email him at michael@portwrencapital.com.
Port Wren Capital LLC is a boutique value investment security research company that specializes in uncovering undervalued companies with strong long-term potential for people who want to maximize their investment profits. For additional information, visit www.portwrencapital.com.
