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An Election-Year Lexicon

Are there certain ways we'd prefer political issues play out occasionally? Certainly. But that's largely predicated, again, on the likely impact on the private sector.

In that particular game we're typically rooting for the private sector, not the government. Who the political players are and which side they come down on matters far less to us. After all, as our CEO, Ken Fisher, commonly says, the term "politicians" is from the Greek, poli- meaning "many," and -tics meaning "small, blood-sucking creatures."

So in a year like this, we attempt to strip out the ideology and strictly look at politics' likely impact on markets.

Fortunately for investors, election years where we either reelect a Democrat or newly elect a Republican are the two best scenarios of the four possibilities (the other two being, of course, newly electing a Democrat or re-electing a Republican).

That's tied largely to the sentiment associated with those two outcomes: In re-electing a Democrat, markets recognize we've retained a known quantity, which markets typically prefer to the uncertainty associated with someone altogether new.

On the other hand, in newly electing a Republican, markets are typically quite optimistic, generally believing the newly minted president more likely to be business-friendly and private sector-oriented. Whether it actually plays out that way is up for debate.

The lesson for investors in election years is undoubtedly a challenging one -- stripping out one's emotions and ideology is incredibly challenging, particularly when politicians do their best to milk language for all it's worth.

But the benefits outweigh the difficulty of that challenge in allowing investors to potentially see beyond the noise and take advantage to the extent they can of the market's movement.



This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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