Impeachment Talk and Your Money

Whether you lean “right” or “left”, the impeachment inquiry currently underway is making a lot of people nervous regarding their investments. In our 30-plus years in business, we’ve witnessed many similarly disruptive events. We have also studied the market going back to the early 1900s. Our conclusion is that disruptive events which impact the market fall into two categories:

  • Category #1 refers to those economic and financial events that influence the fundamentals of the overall economy and investment markets. This is the most significant one. These events usually require changes to the underpinning assumptions of your investment strategy and possibly your lifestyle - especially if you’re drawing income from your accounts.
  • Category #2 covers all other events; we call this “noise”. Today the “noise” is the result of infighting within the political class as both sides keep shouting over each other’s heads in an effort to get the public to side with their position. Generally, the best course of action for your investments is to ignore the “noise”. However, if that “noise” leads to policy changes which fundamentally alter the US economy, the tools we use to design and manage portfolios will allow us to make appropriate adjustments.

In addition to the current political “noise”, we now also have a bull market that’s been going on for an exceptionally long time. Although it’s a fact that this bull market will end, no one knows when. But that doesn’t stop the “noise” coming from cable news talking heads and financial salesmen trying to scare you into pulling your money “out of the market” and put it into gold or annuities. Not knowing when the bull market will end is not a problem if you have a disciplined strategy in place, and you stick to it.

Not knowing when the bull market will end is not a problem if you have a disciplined strategy in place, and you stick to it.

Many years ago, we developed our own governing document to help clients ignore the “noise” and follow a disciplined approach to investing. While not as complex, our document is similar to ones used by institutional investors, large endowments, and pension plans to manage their money. It’s called an Investment Policy Statement (“IPS”).

For those of you who are clients of ours, you may recall how we drafted and adopted an IPS to help guide us in managing your account. Your IPS works by:

  1. Documenting the purpose and objective of your account
  2. Defining the roles, responsibilities, and accountability for all involved in managing your account
  3. Establishing a disciplined process for making changes to your account when necessary

An IPS does not eliminate the stress, uncertainty, and concerns that naturally arise during disruptive events. It does, however, serve as a guide that helps us and our clients remain disciplined and focused on their goals and overall plan despite the emotion and “noise.”

In the coming months the “noise” from politicians, the media, and your friends and colleagues will most likely get worse as we get closer to the presidential elections in 2020 and the impeachment inquiry runs its course. You’ll also hear a continued increase in “noise” from financial experts sounding off with alarms from their crystal ball about the end of the current bull market and the proverbial correction in the stock market.

As difficult as it may be, don’t let the “noise” from talking heads in politics or finance stir up your emotions with fear about the future or anger about the past. A properly drafted IPS is the best way to remain focused on your goals and protect your money.