Though it may look like the chasm between the two candidates is extremely large, the chances of the markets (including gold and silver) making major, lasting shifts in any direction based on the victor are slim.
What should you do if Obama wins? How should you prepare?
If historical statistics are any indicator, you should be content if he wins, as the market tends to perform very well under an incumbent Democratic for all four years of his presidency almost two-to-one. Republicans do quite well for a year, then the market tends to lose momentum and shrink. Why is this? People like stability: better to have the devil they know running things than be caught out.
It is tempting to use the presidential election as a justification to move your money from one investment to the next, hedge in one metal versus another, forgo stocks altogether, cash in CDs and launch that business.
- “I was just being prudent.”
- “I was just taking advantage of the opportunity presented by the results.”
- “It was the election! The election made me do it!”
Whatever fiscal follies you hope to execute under the cover of the election, know that the fundamentals of the market are not and will not change any time soon. Those decisions are yours, and yours alone.
Analysts agree: this particular election is a non-event. Whether Obama stays in the White House or Romney replaces him, the reality is such that neither man can stop this train. Right before and after an election, there is a lot shifting of paper for smaller funds who allow themselves to be carried away with emotion, forgetting the fundamentals of the market. But typically a week after the results, things settle down, and trading becomes more rational once again.
However, with QE3 and the massive amount of money printing happening on a global scale, it is likely that for precious metals, the market will not see “down” for while.
“The market” is not a living, breathing entity; it is a series of complex relationships and agreements between people at the local, state, national, and international levels. Though the US is considered an “economic powerhouse,” the weakness of the dollar and the QE3 process indicates that, if you hold a diversified portfolio, you will be fine. However, we at Birch are of the mind that holding physical gold is truly a great investment and a smart hedge against financial instability.
That instability is here now – and it has been around since before the last presidential election in 2008.
Looming on the horizon is that vaunted “fiscal cliff” of which so many financial newscasters have been making so much. Romney or Obama, the Congress will need to do some massive rearrangements of the deck chairs in order to stop those automatic cuts, and that means more instability in the markets as investors try to negotiate and guess an outcome that benefits their positions. Should Congress manage to right the ship and not go over the waterfall, there are plenty of sandbars to snag up the economy: reducing the deficit cannot be done by decree, signing statement, or Presidential Order. All those agreements among all those people all over the world will decide how much our debt will cost and that will determine how best (and how fast) to pay it off.
So, how should you ready yourself for an Obama win? The same way you should ready yourself for a Romney win: diversify your portfolio, hold physical gold, reduce your paper exposure. But whatever you do, make sure you do it with a calm, clear mind. It’s your money; not the politicians.