PDF Politics & Investing - Raymond James

[Pages:16]Politics & Investing

A Campaign for Your Future

Most investors think volatility will increase leading up to the 2016 presidential election1

To gauge investor sentiment about the upcoming presidential election, we surveyed a group of American investors. Not surprisingly, a majority of us, 61%, expect the election to result in increased market volatility.

No Effect

29%

Less 10%

Volatility

61%

More Volatility

NOT FDIC INSURED ? MAY LOSE VALUE ? NO BANK GUARANTEE 1

Politics & your portfolio

Presidential elections can be nerve-wracking. How might a new administration's policies impact our

61%day-to-day lives, our jobs, and the wealth we've worked hard to accumulate? Presidents serve the people. And as they strive to protect our nation's future, we must stay focused on 1o09%u%r own financial futures. Because of the anxiety elections can cause, it's important to understand the relationship between politics and investments to approach the election process with confidence. "Markets hate change, but ultimately find their footing. The upcoming election will likely cause more stress to American voters than to the stock market." Nanette Abuhoff Jacobson Asset Allocation Strategist at Wellington Management and Global Investment Strategist for Hartford Funds

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10%

Investor Perceptions

5%

America's political pulse

0% J

As we head into the 2016 election, "we the people" are uncertain. The stakes have changed for this election, and we want a new type of president--one who will shake things up to face today's challenges, such as terrorism, in addition to protecting our jobs and our portfolios.

In general, more people think a Republican president will be better for their investments1

Which do you think will be better for your investments?

43%

A Republican President

Most people think presidents have some influence on stock market performance1

How much influence does a president have on the stock market?

14%

NONE

23%

A LOT

64%

A LITTLE

24%

A Democratic President

32%

No Effect

Doesn't matter

29%

Less 10%

Volatility

Due to rounding, percentages may not appear to add up to 100%. 3

Americans' overall views of the federal government are very negative4

Only 19% say they can trust the government always or most of the time, among the lowest levels in the past half-century

77%

61%

More Volatility

60% 17%

61% Tru1s09t%%the gov't always/most of the time

19%

1958 1970 1980 1990 2000 2010 2015

%

%

% Jun '15

Jul '15

Aug '15 Sep '15 Oct '15 Nov '15

Terrorism is the #1 issue on our minds leading into the election2

Recent trends in "most important" U.S. problems

Dec '15

Debates are great for ratings

20%

The first Republican primary debate, televised

by Fox News in August 2015, averaged 24 million

15%

16%

viewers.6

13%

In past election cycles, GOP primary debates

10%

9%

at this point have averaged only 2 to 5 million

7%

viewers.7

5%

0% 6/15

7/15

8/15

9/15 10/15 11/15 12/15

n Economy n Government n Gun violence n Terrorism

REPUBLICAN DEMOCRATIC

MORE THAN

MORE THAN

24m 15m

PEOPLE WATCHED

The main hope for a new president is that we elect someone who can bring about change3

Which of the following is more important to you in a presidential candidate?

55%

37%

In October 2015, the first Democratic primary

deDbEaMteOCaRvAeTraICgeDdEB1A5T.3E million vRieEwPeUrBsL,ImCAaNkiDnEgBitATE

thMe hOighResEt-raTteHd ADeNmocratic dMebOateRinEhisTtoHryA.5 N

15 MILLION PEOPLE WATCHED

24 MILLION PEOPLE WATCHED

New ideas and a different approach

36%

5%

Experience and a proven record

DEMOCRATIC DEBATE

MORE THAN

15 MILLION

PEOPLE WATCHED

Due to rounding, percentages may not appear to add up to 100%. 4

Political Party & Market Performance Political Party & Market Performance

Past party performance is no guarantee of future results

Although the difference in the returns below seems to contradict the headline above, in all actuality, presidents have little direct control over the stock market. So what does control the stock market and influence the economy?

Average annual returns under Republican & Democrat presidential terms9

Average Annual S&P 500 Returns (1/20/1961 - 12/31/2015)

8.71%

13.29%

Republican Democrat

Underlying factors that govern the stock market10

1. Company/business profitability

Increased demand for goods and services boost company profits and, ultimately, stock prices.

2. Interest rates

Currently, low interest rates are helping to boost economic growth and make firms more profitable, and helping stocks to look more attractive than saving money in a bank or holding bonds.

3. Investor confidence & expectations

We're driven by emotion. When the going is good, so are we. But when prices fall, we often follow suit and exit the market.

4. Global markets

In the course of analyzing all our investment choices, stocks can benefit when bonds or other investments seem less appealing, depending on the investing environment.

The S&P 500 Index is a composite of 500 leading companies in the United States.

Past performance is no guarantee of future results. Indices are unmanaged and not available for direct investment.

Black Monday

If you were an investor during the Crash of 1987, it's likely you remember that day well. On October 19, 1987, the market plummeted, shedding 22% of its value before nightfall. President Ronald Reagan was quick to reassure the nation. "All the economic indicators are solid," Reagan said. "There is nothing wrong with the economy."

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Does the stock market have a commander in chief?

Of the many factors that influence the stock market, the president is likely the least of them.

As mentioned on the previous page, broader macroeconomic influences are what truly drive the

markets. Consider this: As the largest company in the S&P 500 Index,11 the release of a new, cutting-edge product from Apple will move the market more directly than the president.

iPhoneTM vs. White House: Which has a bigger effect on the markets?

The power of the iPhone11

Made mainly overseas and sold worldwide, it stimulates the global economy

Sales typically surge when a new phone or upgrade is announced

Apple is responsible for creating and supporting 1.9 million jobs. Nearly threequarters of those jobs--1.4 million--are attributable to the iOS ecosystem12

94% of small businesses use smartphone technology, saving them $65 billion a year and increasing productivity13

Indeed, equities ended the year in the black. Granted, the market was only up a scant 2%. But 1987 ended in positive territory, not negative.

More importantly, investors who didn't abandon equities during those dark days were

handsomely rewarded. A modest $10,000 invested immediately before Black Monday on October 16, 1987, would have been worth $119,830 (average annual return 9.20%) by December 31, 2015.9

Performance is represented by the S&P 500 Index. Past performance is no guarantee of future results. Indices are unmanaged and not available for direct investment.

$10,000 INVESTED ON 10/16/87 WOULD

HAVE GROWN TO

$119,830

BY 12/31/15

AVERAGE ANNUAL RETURN

9.20%

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PoPloitilciPtaiolcPlaiatlriPtcyaa&rl tPMyaa&rrtkMyet&aPreMkrfeaotrrmkPaeentrcfPeoerrmfoarnmceance

Party affiliation & market performance-- are they related?

There's a perpetual debate as to whether one party can

better handle the presidency than the other. For investors, it's a moot point. As the chart below shows, stocks have

done well in the long term with a mix of Democratic and Republican presidents.

$10,000 invested in 1961 would have grown to nearly $2 million in 20159

Average annual S&P 500 Index Returns returns during each administration

$10,000,000

John F. Kennedy

1961?1963

12.4%

$1,000,000 S&P 500 Index

Lyndon B. Johnson

1963?1969

10.3%

S&P 500 Index

Richard M. Nixon

1969?1974

-1.6%

S&P 500 Index

Gerald R. Ford

1974?1977

18.1%

S&P 500 Index

Jimmy Carter

1977?1981

11.7%

S&P 500 Index

Ronald R. Reagan

1981?1989

14.2%

S&P 500 Index

$100,000

Bay of Pigs Cuban Missile Crisis JFK Assassinated Riots in Watts, Los Angeles Assassination of Martin Luther King Tet Offensive, Vietnam Kent State Shootings Watergate Scandal Oil Embargo Nixon Resigns U.S. Withdraws from Vietnam "Whip Inflation Now" Carter's "Malaise" Speech Hostage Crisis in Iran Oil Crisis Record Inflation Reagan Shot by John Hinkley Record Unemployment Iran Contra Scandal U.S. Bombs Libya Black Monday

$10,000

$1,000 12/31/60

1965

1970

1975

1980

7

Past performance is no guarantee of future results. Indices are unmanaged and not available for direct investment.

1985

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