Washington Counts Votes. I Count Profits

Tomorrow night, televisions across America will be tuned to election coverage. 

Maps will change colors as commentators explain what every result means.

I’ll be watching, probably with the remote within easy reach.

But I won’t be deciding which stocks to own based on which party wins.

After more than four decades on Wall Street, I’ve learned something about elections. They can stir up emotions that belong nowhere near your portfolio.

Warren Buffett put it plainly during a 2017 CNBC interview. “If you mix your politics with your investment decisions, you’re making a big mistake.”

That advice deserves a place beside your television tomorrow night.

You can care deeply about the election and still invest with a clear head. 

Your vote reflects your hopes for the country. Your investments need to reflect what businesses can earn.

Confusing those two decisions can cost you real money.

Imagine buying a successful pizza shop in your neighborhood.

The customers love the food, and the owner knows everyone’s name. Every Friday night, families line up to collect their orders.

Then your preferred candidate loses an election on Tuesday.

By Wednesday morning, you’re ready to sell the shop.

The ovens still work, and the customers still want pizza. Yet suddenly, you feel less comfortable owning the business.

You probably wouldn’t make that decision with a neighborhood shop. But with stocks, it becomes surprisingly easy to do.

A falling share price makes your worries feel more urgent. A confident television guest gives you another reason to sell. 

Before long, you’re making a business decision without studying the business.

That’s when it pays to step back from the screen.

Look at what customers are buying and whether profits are growing. Study how management plans to handle the challenges ahead.

Those details tell you much more than your mood after watching election coverage.

Of course, government decisions can affect what a business earns.

Taxes matter, and regulations can raise the cost of doing business. Federal spending can create opportunities or leave companies facing less demand.

Investors are weighing those possibilities as tomorrow’s midterm elections approach.

We need to pay attention when policy changes the investment case.

Let’s go back to that pizza shop for a moment.

Suppose a new rule raises the owner’s operating costs. 

You would want to know how much more it costs. Then you would examine whether the shop could absorb the expense.

Perhaps customers would accept a small increase in prices. Perhaps the owner could reduce waste or negotiate better supplier terms.

The answer would depend on the strength of that particular business.

We should bring that same practical thinking to our stock portfolio.

An election result tells us who will hold office. It takes more work to understand what that means for shareholders.

We get paid for doing that work carefully over time.

Selling first and studying later can turn uncertainty into an expensive mistake.

Tomorrow’s winners will have plenty of work ahead of them. So will the businesses we own through The American Prosperity Report.

They’ll need to serve customers, manage costs, and find ways to grow. That’s where I’ll keep my attention after the votes are counted.

I remain optimistic about America because people across this country keep building, improving, and solving problems. I want us to own a share of that progress.

Tomorrow gets one vote. Your financial future gets years of my attention.

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If you have questions, you can send them to me at [email protected].

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Regards,

Charles Mizrahi
Prosperity Insider