Monday, November 1, 2010

Tuning Out the Noise

While looking through the news this morning, I noticed an article by E.S. Browning in The Wall Street Journal entitled, "Stocks Face Dark Side of Gridlock in Capital". Basically, Browning contends that while Wall Street was excited both about tomorrow's elections and the Federal Reserve's announcement that it will support financial markets by buying bonds, it is now worried that it "overdid" things. Such is the way Wall Street works, unfortunately!

Investors see this type of thing goes on all the time: the future direction of stock prices are constantly debated in the media and whether or not the markets have more run to run, or if they've run their course. Browning goes on to write that "but longer term, some investors are starting to question two widely held tenets of election-related investing: that Washington gridlock is good for stocks, and that stocks inevitably rise in the third year of a presidential term, which is next year."

Readers who are part of Generation WISE understand that such thinking is truly worthless in the grand scheme of things. Sure, studies may show that Washington gridlock helps stocks or the political party of the President matters, among other theories. None of this matters over the long-term because we're not timing markets. As long as you're well-positioned for the future with an asset allocation that suits your return objectives and risk tolerance, you won' t have to worry about day to day market fluctuations.

Tomorrow is November 2 - Election Day - but you'd do best to tune out the noise and not worry about what predictive power such a short-term political change has on stock prices; it won't matter for the long-term investor.

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