Short read: 10 Investing Lessons from the 2024 Election

Investors tend to follow political developments particularly elections with great interest with the hope that they can align their portfolios to benefit from these developments. Implicit in this is an assumption that elections have a bearing on investment returns. The market’s rally since the elections reinforces that belief. But in this piece, Barry Ritholtz providing some clarity of thought, first on our inability to predict these outcomes and even more so the little or no impact on our long term investments. Whilst he lists ten lessons, all useful, we feature the last three here:

“Speculation is rampant
The simple truth is that every cable channel I watched, from Fox News to MSNBC, CBS to CNBC, and Bloomberg, spent most of its election coverage over the prior six months engaging in speculation and opinion.

This is fine so long as you understand what it is: I treat it somewhere between idle gossip and the chatter of sports fans. It’s not useful – it’s not even news – it’s simply entertainment.

Nobody knows anything
You might have noticed a pattern: Humans are simply terrible at forecasting the future. And, we don’t really understand the present.

It doesn’t matter the field: Movies, music, politics, the economy, and most especially markets. We spend way too much time imagining we know what comes next when our track records clearly reveal we have no idea what is going to happen.

The world is filled with randomness. Making a guess 6 to 12 months ahead of time gives the universe ample opportunity to throw a curveball your way.

There is a famous Yiddish proverb: “Der Mensch Tracht, Un Gott Lacht.” It translates simply as “Man Plans and God laughs.”

Humility is in Short Supply:
Wall Street suffers from a scarcity of humility. This is another chapter from “How Not to Invest.”

We know less than we think we do, and we act recklessly despite our ignorance. Those who pretend otherwise are usually selling something.

We do not know what the future will bring. We have only a rough understanding of the past (which occasionally can be useful for extrapolating forward) and little understanding of the present. We assume the future will look like the past, which it often does not.

Good money management requires a certain humble quality that is quite rare in the field of finance. By now, you should be familiar with how all of these bad behaviors lead to poor outcomes.
You must ask yourself, “What don’t I know?” Make that self-inquiry frequently.

Not to play Cassandra, but we discussed all of  these topics repeatedly over the past year. It feels like we go through this exercise every election. (Here is 2016’s version).

To quote German philosopher Georg Hegel, “The only thing that we learn from history is that we learn nothing from history.””

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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.