Navigating the Election Year: Focusing on Data Above Narrative

As we all know, 2024 is an election year filled with extensive media coverage – some of it valuable, some questionable at best. Here are some insights we’re discussing with clients as we approach early summer 2024.

Follow the Data, Not the Narrative

It’s crucial to prioritize data over narrative, especially amidst the election season’s media bombardment – from traditional outlets to social media. Here are three key points to consider:

1. The Federal Budget Debt

The prevailing narrative claims that the federal budget debt is spiraling out of control and will bankrupt the country. However, the facts tell a different story. While federal budgets and debt are significant concerns, debt coverage is an important measure. Currently, the interest cost on the debt is about 2.6% of GDP. Historically, from 1980 to 2000, this figure averaged around 3.2% of GDP. While the debt is indeed growing, and the coverage number is increasing, the country is far from bankruptcy.

2. Corporate America’s Resilience

Another narrative suggests that corporate America is in trouble, with the global economy catching up and threatening to crumble the U.S. economy. In reality, 12 of the 13 most profitable quarters in corporate America’s history have occurred in the past 12 quarters. Concerns do exist, particularly regarding how Artificial Intelligence (AI) will impact various sectors, including finance. While AI’s rapid advancements make future predictions challenging, the current data indicates a strong corporate performance.

3. The Integrity of the Election

There is a narrative claiming that the election is fraudulent or predetermined, rendering individual votes meaningless. I disagree with this view. As of today, predicting the election outcome is impossible because of the ongoing narratives about trials, verdicts, candidate ages and more. Nonetheless, the election will occur, a winner will be declared, and on Nov. 6, financial markets will open, people will go to work and life will continue.

Adapting to Alternative Outcomes

As financial advisors (or executives of Fortune 500 companies), we prepare for various outcomes. Personal preferences aside, in finance, we adjust to whatever may happen. For example, if Trump wins, it might be wise to avoid investing in certain international sectors because of potential tariffs on imports. Conversely, if Biden wins, companies benefiting from his Green Initiative might be promising investments.

While we may vote with our hearts, in business, we invest based on the data. QCBN

By Steve Schott

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Steve Schott has been a financial advisor since 2010. His expertise in business ownership and capital management spans banking, office products, office machines and autos. A former owner of Prescott Honda, Steve holds an MBA from the University of Arizona and a Bachelor of Science in Finance from The University of Denver. Steve is a proud graduate of Prescott High School and an avid community volunteer. Steve purchased Tomlinson Wealth Management from its predecessor, Andy Tomlinson, in 2019, making Schott Financial Management a third generation financial firm in Prescott.