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Politics and Investment Performance

Posted November 14, 2012 in Advice Column, Grimes

As the date of me writing this article, we still do not know who will be elected in the 2012 presidential election.

However, with President Obama’s first term in office coming to a close, here’s the result of an investigation into the relationship between the composition of the legislative and executive branches of the U.S. government and market performance:

The “unified” situation refers to years when the Senate, the House of Representatives and the White House were controlled by the same party. The “partially divided” situation represents years when the House and Senate were controlled by the same party, but the White House was held by a different party. The “completely divided” situation uses data from years in which the two houses of Congress were divided. Both the S&P 500 and the Diversified portfolio of 60 percent stock/40 percent bond averaged the highest returns during unified years.  There were lower returns during partially divided years, and the lowest returns under completely divided years

This study was done from 1926 to 2011. There were 45 years of “unified” years, in which the S&P 500 averaged 14.8 percent and the diversified portfolio did 9.9 percent. There were 30 “partially divided” years in which the S&P 500 did 11.1 percent, and the diversified portfolio did 9.5 percent. There have been just 11 “completely divided” years, and the S&P 500 did just 1.1 percent, and the diversified portfolio did 7.4 percent.

As you look at your portfolio, it is important to identify your risk tolerance and time frame. To see if your portfolio is positioned correctly after this election, please contact us and set up a meeting.  We can help with your investment management and help guide you through these changing times. Please come see me at City State Bank or call me at (515)986-2265 to set up a meeting.

Not FDIC insured, not a bank deposit or product, not guaranteed by bank, may lose value and is subject to investment risk including possible loss of principal.

Information provided by Wade Lawrence, City State Bank, 100 N.E. Jacob St., Grimes, 986-2265.

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