Presidents and Recessions

A few quick thoughts regarding the debate the other night…

There is a lot of fear around the economy, our investments, and the next president, so I felt it’s important to share a few ideas to keep in mind while we head into more noise surrounding the election.

And I’ll preface this as I do with all things concerning politics - “I don’t get paid to pick sides. I get paid to help you plan ahead.”

1. The economy runs on a Cycle. Expansion. Peak. Contraction. Trough. 

We all learned about economic cycles in middle school. But during elongated “good times,” it’s easy to forget that this is how the economy works. Always.

2. Recessions are a “WHEN” thing, not an “IF” thing.

I heard in a recent podcast episode an excellent quote from Morgan Housel, author of the book “Psychology of Money:”

“When there are no recessions, people become optimistic and increase their leverage (debt). When debt increases, the economy becomes fragile. When the economy becomes fragile, that is the start of the next recession…lack of recession plants the seeds for the next recession.”

It’s been a while since we experienced a broad economic recession. I’m not saying the recession will hit next month next year or two years, but it is coming somewhat independent of who becomes president. Think of it like pay now or pay later. Either way, it’s going to happen.

3. Interest Rates move in cycles with the economy. 

When times are bad, the Federal Reserve (not the president) lowers interest rates to facilitate access to money. When things get “overheated,” or good times, the Federal Reserve eventually raises interest rates to slow things down.

The next president will likely receive credit for lowering interest rates regardless of who wins. They are already on their way down.

4. Inflation (increasing costs of our everyday expenses) has averaged 3.30% per year over the past 100 years. Trading Economics

Historically speaking, our lives get about 3% more expensive each year. From 2010 to 2020, we averaged about 1%. We were in recovery mode from the Financial Crisis. In 2022, we experienced what we hadn’t felt for a decade all at once, like a ton of bricks.

I’m not planning for the price of my eggs, milk, and bread to come down, no matter who wins.

You can safely assume life gets 3% more expensive every year.

Conclusion:

Decisions about investing in stocks and real estate should look out far beyond the next four years.

If former President Donald Trump wins, keep buying stocks and keep buying real estate.

If current Vice President Kamala Harris wins, keep buying stocks and keep buying real estate.

If it’s a bad investment, it’s a bad investment, no matter who the president is.

Opportunities arise for those who plan and prepare for the opportunities.

Securities offered through LPL Financial, Member FINRA/ SIPC. Investment advice offered through IHT Wealth Management, a registered investment advisor. IHT Wealth Management and AutomotiveWealth are separate entities from LPL Financial. 

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