An Election-Year Lexicon

By Fisher Investments

NEW YORK ( TheStreet) -- As if it weren't hard enough to know if a politician means what he says. Now, they say what they mean, but what they mean isn't what those words mean at all! According to them.

For example, this year we've already had  President Obama's "You didn't build that" moment, and now Republican candidate Mitt Romney's anecdote which allegedly indicates he "doesn't care about half of America." How politicians define some words and phrases would undoubtedly surprise some folks.

Take "spending cuts," for example. To most folks, that means a decrease in the total amount the government spends on whatever service or program is in question. Cutting total spending. Yet, to many politicians "spending cuts" actually means a cut in the rate of growth of spending. In other words, more spending, just not as much more as originally indicated. Both sides of the aisle are guilty of this little rhetorical trick.

How about "fiscal stimulus"? Yet another example of a term that can mean two very different, near opposite things.

To many (typically, though not exclusively, on the left), fiscal stimulus means at its core more government spending -- on infrastructure projects, social services, entitlement programs like Medicare, Medicaid and Social Security.

But to many others (mostly on the right), "fiscal stimulus" could mean something much more akin to tax cuts and business deregulation -- putting the pieces in place to decrease government's overall size and provide a stimulus to the private sector through less burdensome government involvement.

The list is endless, and the meaning of any term that could be included on the list could no doubt be debated for hours.

But for those of us in the investment world (and likely the private sector more broadly), there isn't the luxury of endlessly parsing language. There's simply the reality of regulations, taxes, policies, laws, etc. and their likely impact on future business decisions.

Which means from a money management perspective, we don't have much room for political ideology. We remain consciously and deliberately politically agnostic, taking change as it comes and doing our best to assess its likely impact on capital markets and the economy.

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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