Lance-O-Pedia Episode 13 | The Politics of Investing
[00:00:04] Speaker A: The market doesn't care. Okay. The market doesn't care who is President United States. The market doesn't care who is elected as Smith County, Texas, dog catcher in November. Okay. The market doesn't get. Here we go. Here we go. Okay. Everybody got it? The market doesn't care. All right.
[00:00:26] Speaker B: Hello and welcome back to Lancepedia. I'm Garrett Lail with Lance Browning of Tyler, Texas. Lance, good to see you as always.
The topic that you sent to me is. Sounds like a really fun one, politics of investing. I in general, just try to avoid politics altogether, but if we need to talk about it, I guess we can.
[00:00:47] Speaker A: Smart man. We got to do what we got to do. Garrett, didn't we just do this?
I mean, it's like, you know, the way talk about the political process. Kind of like passing a kidney stone. It's a process, right? And apparently we were about to go through it again, so. So there it is. So, yeah. And we generally will title these things, you know, kind of a theme to whatever we're talking about. Obviously that's going to be, you know, your, Your. Your elephant. You know, it's not bulls and bears this time. It's your elephant, your donkey doing this. You kind of see that on the slide there. And so, yeah, you know, we just. We're going to hold hands and get through it. So your first slide. And I'm a. I'm a huge, massive history geek, Garrett. All this stuff on this board behind me, most of those are World War II newspaper clippings. So I'm a big World War II buff. So obviously I'm going to have an affinity for Winston Churchill. He had a lot of really pithy things that he used to say, but this was a good one.
He says the best argument against democracy is a five minute conversation with the average voter. I think those are truer words have never been spoken. Okay. I think that is very, very applicable to everything. And so one thing we kind of want to do, and I get it, it's a political silly season. I get that, too. But we want to make the. We want to take complexity and turn it into relevance. And that's kind of where we want to. Where we want to go today. Disclosure disclaimer. We do not provide political commentary here on Lancopedia. Okay? People way smarter than me and Garrett get paid a lot of money to provide political commentary. That's not why we're here. We're not trying to tell you red, blue, left, right. We're not trying to tell you orange man. Good. Orange man Bad. You figure that out on your own. We're just here to try to give you the data and try to kind of separate a little bit the narrative from the actual data. Okay, so we'll talk about that. And so kind of just an update where we are as of mid ish September. So the S and P, which generally is our benchmark, okay. For, for the market, was up about 12ish percent through the middle of September.
September's kind of yucky. His September historically is not a good month. That's usually your worst month. So we're hanging in there. The Dow Jones Industrial Average is up about 8% year to date. So decent, probably average, normal year.
And we're going to talk more about this in our next podcast, Shameless Plug here. Barclays Aggregate bond index, Garrett, what we would call the ag down this year. Bonds are down this year. And we're going to talk a little bit more about that in our next episode. Okay, so your typical balance, 60, 40 stock bond balance, portfolio, couch potato portfolio is up about 7% year to date. So single digits, but decent, you know, well, decent. And we'll talk a little bit kind of about how we got here. Okay. And so one of the things to keep in mind too is the, what we call the Magnificent seven. So so far, for the last three or four years, Garrett, the market has been driven primarily by seven big tech AI driven stocks. That's going to be your Nvidia, Apple, Google, Netflix, let's see who all Tesla, Facebook. That's going to be your big Microsoft, your big tech AI companies. Okay, Those are primarily driven the market the last three or four years. This year they're actually underperforming the market a little bit. And that's one thing to keep in mind. We kind of go through all these, we look at the ups and downs day to day in the market. I don't think, Garrett, that the money's disappearing. I think it's moving around. I think you're seeing what we call guys, what we call sector rotation. Money's moving from here to here. It's not going away, but it's moving out of a lot of these big magnificent seven tech AI driven names. So that's a, that, that's something to kind of keep in mind. All right, and kind of next up here we'll talk, you know, and Garrett, I know you've had these conversations over the years, but other people called me up and asked me, so Lance, what is the best financial advice you can give a person? Okay. The answer is run for Congress. Okay.
[00:04:59] Speaker B: All right.
[00:05:00] Speaker A: You really want to make a killing investing in the market? Be a member of the US Congress. You'll kill it. You will kill it. And so what you're looking at here is a table of Congressional trading. This is from 2025. This is last year. Okay? And you're going to see the performance numbers of these various members of Congress. Okay? All right. Again, we do not provide political commentary here on Lancapedia. But you'll notice it ain't all red and it ain't all blue.
Okay? That's a pretty diverse. Pretty diverse breakdown of who's doing what. So, you know, back in the day, Gary, you know, we've had all the CE and the compliance and legal and training, all that about no insider trading. Okay? Apparently that does not apply to Congress. All right?
And the other thing is, you know, we get this question a lot, and we talked about this ad nauseam before the 2024 election, but which political party? So, Lance Garrett, what party is the best for the market? Okay, hear me out.
Recurring theme. We're going to say this again and again and again. Okay? The market doesn't care. Okay? The market doesn't care who is President of the United States. The market doesn't care who is elected as Smith County, Texas, dog catcher in November. Okay? The market doesn't care. Here we go. Here we go. Okay, But I got it. The market doesn't care. All right? So going back to early depression, early 30s, okay, which party has done the best? Okay, Blue donkey, obviously Democrat, Red elephant, obviously Republican. And you're seeing, by and large, it's gone up regardless. Okay? It hasn't really mattered because, again, the market doesn't care about what political party is in power. Okay? Now this gets kind of significant here, okay? So what you're looking at is the blue here in these little bars. The blue is the average return in the market. The orange is the average drawdown or average drop. And we've talked about this a lot, historically, through the year, the average drop in the market sometime during the year, intra year, the S and P, is gonna drop about 14.2%. Okay? That doesn't mean anything's wrong with the market or the world's ending or sky is falling, but that's normal. Okay? So you'll see first year in office here of a presidential cycle. You're going to see the market's up an average of about 8.4%. Okay? Midterm year, which is where we are here. So we want to set expectations. Midterm year is about 4.6% on average. Okay. Pre election year, we're going to talk a lot more about that third year in the presidential cycle. Midterm years about normally about 14.3. And then final year, fourth year, election years up about 8.1. So of the years of these cycles, that second year historically has been the weakest. All right, so regardless of whether it's a Republican or Democrat, that's just the history of it. Okay. And so we've gone back and we've drilled some stuff down here, but you're going to see presidential elections and cycles. And I can go back to 1833, all the way back, okay, from 1833, from Jackson to Trump. Right. And you're going to see post election year average about 6.36, 6.36% down there at the bottom, you're going to see midterm year, about 6.95. Here's where it gets interesting. Third year of the presidential cycle, which is going to be next year, historically 12.2%. Fourth year, 10.34. So clearly, again, this tells us those first two years typically are the weakest in that cycle. That's very, very normal.
And so just something to kind of keep in mind here. Okay, so these are winning percentages. Okay. These are not rates of return. Garrett's. But these are. What percentage of time was the market up in a given cycle? First year presidential cycle, the market historically has been up about 57% of the time. Second year, we're here 62.5. Third year, 75%. Fourth year, 77.08. So you're seeing those returns typically are skewed towards the back end of that four year presidential cycle. That is normal. That is normal. You can see a little heat map here with the red and the green. Okay, Going back a ways, you can see number of up years during presidential cycles, 131. Number of down years, 62.
So more than 2 to 1.
The market's up during those political cycles. Okay, and here you go. This just reiterates this really kind of drives this home. But presidential election cycles, year one, historically about 6.3.
Year two, here we are about 6.7.
We're actually, Garrett, we're actually a little higher. Quite a bit higher. We still got a quarter to go, but we're quite a bit higher now than we typically are during that second year of the cycle. So anything above and beyond about 7% is gravy. We're going to call that good. Okay, third year, here we go. Reiterating a point third year, historically, the markets average about 12.2%. That's going to be next year for us. Fourth year, about 10.34. We've kind of talked about these. So we're still in that, that second year historically, which has been the weakest of a presidential cycle as far as the market's concerned. Okay. And so I just started. Garrett, fun fact, just started year 30 in this business Tuesday after Labor Day, okay? It's like, you know, I used to joke about, I would go around and talk to all the crop when I first started, I'd go around and talk to all the crotchety old curmudgeons in the corner offices. You know, now I'm the crotchety old cursion of the bar, right?
[00:10:49] Speaker B: But.
[00:10:49] Speaker A: And I've been hearing since then, oh, well, if, if Clinton gets back in, we're doomed. Well, no, if Bush gets in, we're doomed. No, if Obama gets in, we're doomed. No, if Biden, if Trump gets in, we're doomed. No, Biden gets in, we're doomed. No, Trump gets back in, we're doomed. No. And you kind of go back to Obama. We'll call two Trump administrations. So two cycles of Obama, two cycles of Trump interrupted by Biden kind of there in the middle, you see historical returns so far. Again, dead horse. Okay? The market doesn't care. The market doesn't care. So last but not least, and then we'll get off this dead horse a little bit. But you kind of see if the President is up for reelection, which we're not. Okay? First year, you see midterm year. There you go. If the President is up for reelection, historically, you're about 4.6 in that midterm year, we're not there. So, you know, like I say, you know, I, I think anything above single digits is, is going to be a win for, for the market this year in that second year. Okay? So Garrett got, got some good news, some bad news for everybody, okay? So if you, if you are a Democrat member of Congress or congressional candidate, the bad news is the American people absolutely hate your guts. They hate you. Okay? That's the bad news. The good news, they hate the Republicans more.
So here's a Quinnipack poll here from a couple of weeks ago. Voters favored Dems over GOP and Republicans by 11 points. That's a big move. Two months out for control of U.S. house. That's House of Representatives. And then Trump's handling of Canada trade, Iran, Russia, Ukraine, all below 30%. So we are currently from, we are currently in that midterm election year. Historically, midterm cycles are notorious for generating significant political anxiety. Okay, Like I say, we just got done with all the hand wringing and the whining and all the talking heads in the media and da, da, da, da. But that historically will create some elevated volatility. You'll see that roller coaster kind of moving up and down this. Despite the historical drag though, the market associated kind of with those midterm elections, the market is completely outperforming its multi decade average. So we're ahead of the curve right now, okay? Fueled by strong corporate earnings and we're going to hit that in just a second pretty hard. And sustained tech sector expansion, the S and P is currently up 12% year to date, well above its historical norm in that second year of the election cycle, historically. Here you go in bold.
Once election day passes and legislative uncertainty clears markets experience a very consistent relief rally consists regardless of which political party wins the majority. That brings us to that third and fourth year of the cycle. Okay? So good news, bad news, if you're running for congress here, okay? And so here's what's interesting you're seeing here. So you're seeing all years in midterm years, historically midterm elections out here. The orange is going to be midterm election years and then the other is going to be all years in that midterm cycle. You're looking at about a 4.6%, you know, historical average. Again, we're about triple that right now. So we will take it. One of our big fours, Garrett, that we always talk about are corporate earnings. Okay? Corporate earnings, this is from the LPL earnings dashboard. This is quarter two, which we just finished up quarter three. Those reports will start coming out here pretty quickly. But I want to point something out to you. EPS growth there in the top left, earnings per share, that's the bottom line report card. As these companies report their earnings every quarter, they give us a report card. Corporate earnings, second quarter, up 51.2% year over year. Garrett, that is absolutely smoking. Smoking. And people, you know, will ask me, so how does the market keep going up? Lance, right here, this. Okay, yeah, that's a big deal. And revenue growth, even revenue, which is, you know, going to be top line sales up about 15.6. So I mean, earnings are unbelievably strong right now. A lot of that granted is going to be the tech in the AI sector. I get that. But earnings are really, really, really strong. Okay, so that's some good news. We'll Take the good news always. All right, so earnings dashboard historically were way, way above norm. Okay, so this is a couple weeks ago, September 10th. Okay, GDP now, which is the Fed's kind of projections, GDP now model estimates, real growth, real GDP growth, net of inflation, seasonally adjusted annually for the third quarter of 2026, which we're just about to finish this week, is 4.4%. That's their projection right now. This is from the Atlanta Fed. The Fed now projection, 4.4. That's a, that's a good GDP report card. That's good economic growth. Man. We will take that all day long. Okay?
[00:15:42] Speaker B: Yeah, for sure.
[00:15:42] Speaker A: So that's good news. With everything going on, that's good news. I think that's very good news. Okay, some more good news from, from all this stuff. And, and so in 2025, the poverty rate in the United States dropped to an all, all time low of 10.2%, down roughly half a point from 2024. You're also going to see there to the right, median household income also reached an all time high, growing by 2.6% in 2025. That gain, unfortunately right now, which is the reason for all these problems, is kind of being erased and negated by inflation, particularly oil prices. Okay? So if you really are wanting to look for it, there's a lot of good news out there. There's a lot of reasons for optimism. Okay, now we've seen the good news. All right, let's talk about the polls. All right, the good news is the good news. But how do people feel? Right? How do people feel? Because we're in the seasons of polls, we're going to be just inundated ad nauseam with polls for the next couple of months. So prepare yourselves. Okay? But. And this is going to be a Fox News poll. And again, it's not an endorsement of Fox News. Republican, Democrat, Orange man good, Orange man bad. But this is interesting, and I chose this specific poll, Garrett, for a reason. So June of 2026, okay? To July, okay? The condition of the economy. We just saw the good news. Earnings are incredible. Poverty's dropping, economy's growing, wages are growing. But how do people feel? Which is what a poll is. Okay, July of 2026, a couple months ago, the average person, according to a Fox News poll, the average person said the economy's excellent or good. About 24% of them said that.
[00:17:23] Speaker B: Okay?
[00:17:23] Speaker A: About 76% said it was only fair or poor. We talked a couple of episodes ago about a K shaped recovery would encourage you to go back onto our YouTube channel or onto my website. And look at that K shaped Recovery podcast that we did.
Really, really kind of proves this out. But so basically, despite the good news, how people feel about the economy is not good. That's not good. 76% say it's only fair or poor. That's not a good number if you're a Republican heading into midterm. And clearly we're in an environment and in a media and a cultural environment where where you get your news is going to really, really skew, whether it's all the way left or all the way right. Okay. If anybody was going to give a good encouraging poll to Donald Trump, I would think it would have been Fox News. Clearly not. So that, that's probably not a good harbinger if you're thinking that you want the Republicans to hold Congress in the midterms. Okay, so just I, you know, depending on how, how these polls change, and I think this is going to go up and down and g. Honestly, let's just call it what it is. This is oil prices right here. This is, this is the pain at the pump. I believe that's temporary, but I've been believing that was temporary since March. And we're still here. So what do I know, right? But again, the market doesn't care. Okay. And this is interesting. I just saw this. This came off August, I guess last month, early last month. Morningstar is a research agency, a research organization that we in the industry use there. They're supposed to be kind of a third party, unbiased, you know, objective. They do a lot of data crunching and number crunching for geeks like me, Morningstar, here's, here's the headlines from the Wealth Advisor magazine. Morningstar says investors left 15% of their returns on the tape. Why? Well, they look at polls. They're driven by the narrative that they hear and see in the media.
I'm going to tell you, a lot of that is driven by online client access, where people are on their accounts ten times a day looking at their account values. And they're bringing short term emotion into the equation of long term investing. And those two don't chime in, that they just don't jive. That's a big part of it. So I think, you know, as emotions are kind of our kryptonite for us as investors. And then, you know, right now, particularly political seasons, it exacerbates, it makes it that much worse. So anyway, so just everybody kind of hold your hands. We're going to be all right. We're going to get through this. All right.
[00:19:55] Speaker B: That would be an interesting stat to see. I wish there was a way to track it to see how much investors have left on the table over time as access has increased. How much did they leave on the table in the 50s versus how much they leave on the table now as you and just see what that correlation is. Obviously I don't, I don't think it's out there, but that would be an interesting stat to see if it did.
[00:20:16] Speaker A: Yeah, I've been trying to research that for a while. You're 100% right. I mean, and again, look, I'm not telling you not to stay informed. I'm not saying you not stay involved with your, with your investments and your money. I'm not saying that at all. What I am saying is that when you inject human emotion into investment equations, you're headed for trouble. You will outperform. It will cause you to make short term emotional decisions on your long term assets.
[00:20:42] Speaker B: So you inject human emotion into a lot of processes. It creates problems.
[00:20:46] Speaker A: But definitely investing very, very much so in our industry. I think again, I think that's one of the worst things our industry ever did for its customers was have online real time access where they could sit there all day and do this. Okay. Not a good, not, not a good outcome out of that, unfortunately. Not a good outcome. But yeah, kind of crazy. 15%. That's a big number. That's a big number.
[00:21:10] Speaker B: That's, that's a big number.
[00:21:11] Speaker A: So, speaking of pithy, you gotta throw Mark Twain in there. I love this. He said Mark Twain said if voting made any difference, they wouldn't let us do it. Well, we're gonna, we're gonna hope that's not the case. But we, we'll see. So as always, remember, the market doesn't care. And we're going to get through this. We always do.
[00:21:30] Speaker B: Thank you sir, for your encouragement. And I think the takeaway is that the market doesn't seem to care. I hope we made that point enough.
For anyone who's watching or listening that would like to get in touch with you, how can they find you at troopcom over there in Tyler, Texas?
[00:21:45] Speaker A: There you go. Yeah. 3200 troop highway. Come see us. You can call the office. 903-787-8909, 903-7878909. Get you on the calendar 3200 Troop highway here in beautiful Tyler, Texas or online www.lancebrowning.com. you can subscribe to us on YouTube as well.
[00:22:05] Speaker B: Awesome stuff, Lance. Well appreciate it as always enjoyed it and sounds like things look are looking up after the election. So I look forward to. I appreciate. Yeah, hopefully. So we hope.
[00:22:15] Speaker A: We hope. Yep.
[00:22:17] Speaker B: Always a pleasure. See you my friend. Awesome. Appreciate it man.
[00:22:19] Speaker A: Thank you.
[00:22:22] Speaker B: Lancepedia is for entertainment and educational purposes only. The views and opinions expressed in this show are that of Lance Browning and are not guaranteed to come to fruition. If you have questions about your investments or your financial plans, you should seek a financial professional or give Lance a call at 903-787-8916. We thank you again for watching or listening to the podcast and we'll see you next time.
