Elections and Your Investments

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There is a swell of interest in the outcome of the next presidential election in the United States, should Donald Trump or, in contrast, Joe Biden win. In Canada, we are a few years away from an election, and so interest is building as well. From an investor's perspective, should you care?

Here’s why I think it doesn’t matter: We should all turn off the TV or phone when an expert starts predicting.

1. There is talk of Trump putting up import barriers for all goods and services including car parts or cars themselves. In Canada we have just given tax dollars to several companies building electric vehicles and batteries. The election doesn’t matter on cars because in the end the market will decide. Currently interest in EV’s is falling. Where do you recharge them again?

2. Interest rates will go down if Trump gets in. Well, not really. Although his involvement in real estate may make that happen, why does it matter? Currently, you can get a mortgage in the 5% range in Canada, which is well below the historical average. Presidents have little to do with the day-to-day fluctuation in interest rates. Prime Ministers have even less influence.

3. A different president will change how government services are delivered or provided. Not likely. Civil servants and administrative bureaucrats aren’t elected and have careers spanning all parties elected. The straightforward truth is that services will be delivered or not in the same manner with few exceptions, regardless of who gets elected.

4. In Canada, our Prime Minister has continually referred to his opposition negatively, equating them with the “MAGA” or “Racist Trump” policy. That’s not going to help relations, as Trump never forgets those who attack him. I doubt Mr. Trudeau will be the Canadian prime minister for much longer; however, the reference to the Conservative Leader being more like Trump will help Canada once he is elected. Regardless, this fact will do little to impact investment.

5. Politicians all lie. It’s clear. You can’t believe anything they say or that they will do anything they claim to do. So, in the end, who gets elected won’t change much.

Politicians and democratic societies live under the delusion that elections matter when it comes to investing. Nothing could be further from the truth. Look at what happened a few months ago in Nova Scotia when a Conservative Premier imposed an “out of province tax” if you owned property but lived in Ontario, for example. A Conservative with such a socialist policy. What happened next? People pulled up roots, companies shut down or threatened to leave. The Conservative, acting like an NDP socialist Premiere, changed his tune somewhat and repealed that tax, keeping an elevated land transfer tax on purchases by “outsiders.” The Real Estate market has not recovered since then.

One thing we know is that politicians have great skill in getting elected, especially career politicians. Once elected, when it comes to investing or running something, most have no clue outside of their self-interest. That’s why, in the end, it doesn’t matter. Biden, Trump, Trudeau, or Poilievre. Different story, same outcome.

Learn from investing legends

Warren Buffett reads for 8 hours a day. What if you only have 5 minutes a day? Then, read Value Investor Daily. We scour the portfolios of top value investors and bring you all their best ideas.

Subscribe with one click.