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Ken Fisher Forbes Column: 'Put Them on Mute'
Posted by: guruhl (IP Logged)
Date: May 29, 2012 04:14PM
Ken Fisher, Forbes columnist and founder and CEO of Fisher Investments, discusses the best attitude for investing in an election year:
This year, ignore political babble. You’ll be better off. Ignore debt debates, silly fake controversies and finger pointing over who is or isn’t the bigger fan of private enterprise. (I win that footrace, anyway.) Or whose supporters are richer or not. And whether that’s bad or not. My forecast is for global stocks to end 2012 up big. Tune out the nonsense, and you’ll better enjoy the ride.
It’s an election year—mud will get slung. That’s normal. And you want politicians to sling mud. The more they politick, they less they pass laws (or threaten to). This is standard in election years—the fourth year of the presidential term cycle. Fourth year average returns are 10.9%—second best to the third-year average of 18.6%. The back half is superior historically—less return variability and better average returns—because on average, you get less legislative risk aversion.
Presidents nearly always lose relative power in mid-terms—as Obama did in 2010. This pattern is well known to politicians; hence they typically try to push through their most onerous, landmark legislation in the first two years when their power is greatest. If they can’t pass something then, they know odds likely plummet in the back half.
That new legislation—no matter the societal benefits (real or imagined)—represents redistribution. Money (rights, regulations) are taken from these to give to those. Myriad evidence shows Americans like gains less than half as much as they dislike losses. So when risk of redistribution is higher—as it is in the first two years of a president’s term—folks’ freak-out factor is higher on average, and stocks average 8.1% and 9.0% in years one and two respectively.
Guru Discussed: Ken Fisher: Current Portfolio, Stock Picks
Stocks Discussed: SPY, DJI, QQQ,