Ep 5 - Political Nonsense, the Integrity of Markets, and Broken Clocks as Great Investors

Hello, friends. This is Tyler Gardner welcoming you to another episode of your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing.
So let's get started and get you one step closer to where you need to be. Somehow it seems as if every four years people lose their minds all over again.
Understandable, politics are heavy and elections are ripe with visceral responses from all sides of the literal and metaphorical aisle. Regardless of who's running, who's winning, or who's ultimately holding office, someone, somewhere, always thinks the economy is about to implode.
And as we know, this emotional response to potential economic and market volatility transcends political elections. I challenge myself daily just for fun to see exactly how long it takes me to find a reason, any reason, to justify not getting involved in the stock market.
And it should come as no surprise that I usually find that reason within about 17 seconds of checking any media once I wake up. I will not be unpacking the fact that negative news sells.
But in case for some reason this is the first you're hearing it, just remember, negative news makes way more money than positive news always. And because there's always going to be a reason not to invest, it is both understandable and problematic that many of us continue to wait on the sidelines blaming something, whether it's a presidential election, geopolitical turmoil abroad, or an overvalued market.
That part I get, and that part I appreciate. What I don't understand quite as clearly, or at least might not empathize with quite as deeply, is our inability to remind ourselves that this, too, has happened before.
And usually, it's been far worse. I connect with people daily who try to convince me that this, this elusive concept of this, has never happened before.
We have simply never experienced it, and we should be running to Costco to secure as many five-gallon bins of name-your-condiment-of-choice here. Even with Trump's current presidency, I can't avoid having people claim we have never been in such a state of political turmoil.
And politics aside, and putting truth forward as frequently as I can, I remind people that yes, he has been president before, and we have in fact lived through four years with Trump holding office. The point being, yes, we have been here before, and more to the point of this episode, so too has the stock market.
And as you might see where I'm already going, the market has continued to move up and to the right over time. This is why personally, regardless of what I hear, from whom I hear it, or where someone thinks the market is going based on your politics du jour, no, I do not ever change my investment strategy based on timely events.
So let's start here. The market doesn't care who the president is.
I encourage us all to picture the market as something way beyond our nonsense. Yes, it responds to our nonsense in the short run, our greed, our fear, our collective sentiments, and reactive tendencies, but in the long run, it remains something well beyond our daily struggles.
It remains a reflection of the human spirit's desire to grow, to solve problems, and to disrupt inefficiencies worldwide. Yes, to an extent, it can be viewed as a godlike figure that transcends us, our time period, and certainly, a four-year presidency.
But I get it. It's fun to pretend that elections dictate market performance, as we crave reasons for what is happening, again, just as many turn to the concept of God in moments of praise or blame, to add some semblance of controlled narrative to the utter chaos that surrounds us.
I smile. Sorry, I do.
When I picture those waiting for the market to drop or rise so they can say that it's because of the current president or elected officials. See, the market tanked today all because he's president.
I told you it would. See, the market's up this week all because he's president.
I knew we had our guy. And yes, I am mocking that reaction because it's short-sighted, it's wrong, it's divisive, and it's reckless.
So let's turn to history and see what the actual numbers say, whether we choose to embrace such reassurance or not. Since 1929, the S&P 500 has averaged about 7% annual return in real terms regardless of who was in the White House.
I want you to think about that for a minute. That's the collective tenure of 18 different presidents from FDR to Biden.
And the market has, well, the market has continued to grow, reaching over 50 all-time highs in 2024 alone. But beyond presidents, it has also survived global wars, recessions, financial crises, dot-com bubbles, inflation spikes, political scandals, everything, and most of these moments were in reality far scarier.
Again, not to dismiss anybody's politics. But the reality is that there is not currently a global war, nor are we in the midst of a global financial meltdown, nor are we fighting off a global pandemic.
But even if we were, and even when we did, the market continued to go up and to the right over a long time horizon. Now, sure, some presidents have presided over bigger booms than others.
Under Obama, the market went up 181%. Under Trump, 67%.
Biden's term was slightly more volatile, with inflation rearing its ugly head, but the market is still standing. And last I checked, again, it was at or near an all-time high at the time of my writing this episode.
And here's what we're so quick to forget. The market doesn't move based on who's sitting in the Oval Office.
It often moves, even in the short term, based on business cycles, innovation, interest rates, consumer spending, and consumer sentiment. Sure, I'd be naive to think those things aren't somehow interrelated.
But again, we're talking about short-term fluctuations, not long-term patterns, the only patterns that matter for long-term wealth building. Business certainly doesn't come to a halt when a new president takes office.
Apple, for example, doesn't take the day off from selling iPhones because of an election. People don't stop eating, driving, or paying their phone bills because of an election.
And companies certainly don't stop adapting. If anything, new political cycles and challenges might encourage them to adapt even more quickly to face whatever new problem has presented itself to be solved by the world's top entrepreneurial minds.
If you zoom out far enough, you realize that the market is much, much bigger than any one president. Beyond that, in my heart, I believe fully that no president in history has ever woken up and started the day by saying, you know what? Today, I want to implement some policies that will really fuck up markets.
I'm sorry, you know that doesn't happen. And if you don't, I'd encourage us to go back to empathy.
Go back to what is shared before taking any step forward. Everybody making policy has skin in the game somewhere, somehow, and it is in nobody's best interest to govern a flailing market structure.
But enough of my theoretical approach. Let's turn to some numbers to hopefully add some validity to the above claims.
Here are five things worth considering if you are one of the few, the proud, those who try to time the market based on who's in office. Number one, know that you have a high probability of underperformance.
Empirical evidence indicates that the odds of successfully executing a market timing strategy are slim to none. For instance, Morningstar's Mind the Gap study found that investors earned 9.3% per year on the average dollar they invested in mutual funds and exchange-traded funds over the 10 years ending December 30, 2021.
But this was approximately 1.7 percentage points less than the total returns their fund investments generated over that span,

suggesting that attempts at going in and out of these funds often lead to underperformance. Number two, there will always be a negative impact because odds are you will be missing some of or many of the top market days.
The most significant gains in the stock market often occur during a handful of days. A 2023 study by JP Morgan analyzed the S&P 500 from 2003 to 2022 and found the following.
First, if you stayed fully invested, your annualized return would have been about 9.8%. But if you had missed just 10 of the best trading days, your annualized return would have dropped to 5.6%.
If you had missed the 30 best trading days, your annualized return fell to 0.2%, essentially wiping out all gains. For a moment, just imagine if you sold all of your stocks at the beginning of 2024 when we were first at an all-time high.
You would have missed over 50 new ones. Number three, and this one always gets me because it is 100% within our control.
By hopping in and out of the markets, you guarantee yourself a loss through transaction costs. Yes, it costs money to trade, and the only winner each time you make a new trade is the brokerage firm.
Frequent buying and selling in an attempt to time the market can lead to unnecessary transaction costs, including commissions, and worse, realizing capital gains that you don't need to realize and having to now pay taxes on those gains. Again, these are things that are within your control.
Number four, you're clearly basing your decision on an emotional response. And we all know the first rule of investing is you are forever and always your own worst enemy.
Market timing often leads to decisions driven by fear or greed, causing investors to buy high during market euphoria and sell low during market downturns. This behavior is contrary to the fundamental investment principle of buy low, sell high and can and does erode long-term returns.
But even if you are able to sell high, just ask yourself if your original plan ever included a statement that told you to get out of the markets on a random day when you were 50 years old just so you could spend some time on the sidelines. If it's not in your plan, don't do it.
Finally, number five, investors often perceive the present moment, as we noted earlier, as the most challenging time to invest in history, a sentiment rooted in psychological biases that can and often do cloud judgment. This is known as recency bias.
Investors and non-investors alike tend to overweight recent events, projecting them into the future while ignoring long-term evidence. This recency bias causes many to engage in performance chasing, buying stocks and funds after a period of good performance, and selling after poor performance.
Such behavior often results in suboptimal investment decisions. Extending beyond investing, this bias blinds us to zooming out and remembering that we have, in fact, faced tough challenges before and we will again.
Today is not, in fact, the worst it has been or will be. So I ask again, why would I change my investments for a four-year presidency unless my original financial plan that I have written down in front of me was a one- to four-year plan that needed immediate or short-term liquidity options.
The average presidency lasts four years, maybe eight if they're lucky. My investment timeline? Probably 30 to 40 years.
And even if I were 65 years old, I might have a 20 to 25-year time horizon ahead of me. In other words, that time horizon might extend my thinking through three to six more presidents.
If you're saving for retirement, building wealth, planning for the future, you simply can't afford to make decisions based on what might happen in the next four years. Investing isn't a presidential term.
It's a lifelong play. And the biggest mistake people make is to take money out of the market based on what some talking head is rambling on about and getting paid handsomely to do it.
And yet, every election cycle, some people get antsy. They think, well, this time really is different.
This time I should probably sell my stocks and wait it out. But here's another problem.
If you think this way and act in response to those fears, you sit on the sidelines and continue to miss some of the market's biggest gains, period. Because sure, you might miss some downturns, but I give you my guarantee that you are not going to magically find your way back into the market before it turns, because you'd have to be perfectly right not once, but twice.
First, timing the market top, then timing the market bottom. I've seen some lucky people who do it once.
Heck, I did it once with a single stock. But twice? Sorry folks, we're not broken clocks, even though it would pay us nicely if we were in this example.
So go back to the point that if we missed just the 10 best trading days over the last 30 years, our total returns would have basically been cut in half. Gone.
Just because we were waiting for an elusive concept of certainty that will never present itself as long as humans are prone to fear-based thinking. And guessed when the best days tend to happen.
Yep, right after the worst days. In other words, when fear is highest, the markets tend to roar back.
And most people miss it because they panicked and got out. That's usually when the smart money and investors say, wait a minute, I liked these funds yesterday.
I'll probably like them even more today. So when there's a sale, smart money buys the sale.
Still not smart to time the market, but at least smarter because odds are it's connected to a technological algorithm that is 100% divorced from human emotional responses to make that choice to buy. Timing the market is a losing game.
It always will be, and anyone who tells you otherwise is lying to you and to themselves. I know several professional day traders who after spending decades trying to time their favorite head and shoulders patterns simply bit the bullet and invested in buy and hold low- index funds because over time, they didn't beat the performance of the market.
Nobody is going to consistently beat the average. Not fund managers, not economists, and certainly not your uncle who swears he called the 2008 crash.
And don't tell me that Buffett did it, so so can you. I'll let you figure out the difference between the two of you.
Let's return to the concept of who's in office. I know people who sold all their stocks in 2016 because they thought Trump would wreck the economy.
I know more people who sold all their stocks before Trump took office again in 2025. And all I can say is if you drew a line from 2016 to today, guess where it went.
Yep, up and to the right. And those who sat out during Trump's first presidency missed a 67% market run up over the next four years.
That's over 15% per year. And just think about how hard you work to ask for a measly 3% raise to adjust for cost of living each year.
This is a 5x raise per year for four years. Yes, it's retrospect, and yes, it's facts.
I also know people who panic sold in 2020 because they thought Biden's policies would tank the stock market. They too missed a 30% rebound in just six months, and missed out on over 50 all-time highs in the market in 2024.
I think my own portfolio doubled between 2022 and 2024, and not because I did anything fancy. Trust me, I do nothing fancy.
In fact, I did the opposite. Absolutely nothing.
I just kept averaging my way into five funds and called it a day. Here's the punchline if you haven't seen yet where I'm going.
Take a breath, go for a walk, relax. And although it's fine and understandable to challenge who's in office or speak your views, it is not fine to claim that you are going to base your investment decisions off of short-term noise.
Selling, sitting on the sidelines, and then trying to time your way back in? That's expensive, factually. And I always remind people to control what they can control.
If you sell, you're paying capital gains taxes, you're paying transaction costs, you're missing compound growth, and potentially buying back in at higher prices. The only guaranteed winner, again, in that scenario is your brokerage firm, because they make the money off the trades.
So those are mostly the reasons why I would not change my investments. But I would like to close by offering some reasons why I might choose to change my investments in response to something entirely divorced from the political climate.
The way I see it, the only reason I'd ever change my investment strategy is if something in my life were to change. Do I all of a sudden anticipate needing X amount of money by Y time? If the answer to that question changes in my life, I will most likely move something from risk on to risk off.
And it will be that simple. And it will never be based on anything other than the answer to that question.
It will certainly not be because of short-term external factors, because the stock market might literally be the single most battle-tested concept in history that has maintained its integrity, its forward progress, and its ability to smooth volatility over long enough time horizons. To make it even more personal, this is the first year in my 20 years of investing that I have taken money from risk-on, my low-cost index funds, and placed it in risk-off, my money market fund.
Why? Because I'm about to have an epic tax liability based on my shifting from a W-2 employee for years to a 1099 small business owner. Now with quarterly taxes due and knowing about what that amount will be, I literally cannot afford to have a 10 to 15% market correction wipe out my purchasing power to fund that tax liability.
Not to mention,

the money markets are still a very healthy return right now. So, I put 10% of my assets into a money market fund, not because of short-term politics, but because of short-term changes in my immediate wants and needs.
That other 90%, heck, I wouldn't modify that investment plan ever, as it's low cost, it's diversified, and it's simple. My final thought.
The market moves on, so should you. So I'll leave you with this.
If the stock market can survive world wars, oil crises, the Great Depression, and 18 different presidents, it can certainly survive not just this presidency, but the next election, and the next, and the next, regardless of which side of the aisle you represent. I know many of you will perhaps call me a naive ding-dong for this one, but the numbers confirm that our long-term investments do not care who the president is, and in terms of your long-term financial plans, neither should you.
I would encourage you to heed the wise words of Vanguard's founder, Jack Bogle. Don't just do something, stand there.
Stick to your plan, keep investing, because no matter who's in office, no matter what happens on a daily or four-year basis, over a long enough time horizon, the markets go up. As always, when that changes, I'll let you know.
Thanks for tuning in to your Money Guide on the Side. If you enjoyed today's episode, be sure to visit my website at tylergardner.com for even more helpful resources and insights.
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Social Cap Official. Until next time, I'm Tyler Gardner, your money guide on the side,

and I truly hope this episode got you one step closer to where you need to be.