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‘Trump stocks’ have significantly lagged the U.S. market since 2016 — while ‘Clinton stocks’ have soared

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Take with a grain of salt any forecast about which stocks will do well if Joe Biden wins the U.S. presidency. To be sure, these forecasts can make for interesting reading, but to paraphrase a quotation from Warren Buffett, their only value is to make fortune tellers look good.

Consider what happened four years ago when analysts were trying to guess which stocks would do well during a Clinton administration and which under a Trump administration. They couldn’t have been more wrong.

From two different websites at the time I collected 25 stocks that would supposedly thrive if Clinton were elected and 23 stocks to bet on in anticipation of a Trump victory. I calculated these stocks’ return from their closing prices on 2016’s Election Day (until Oct. 1, 2020). The chart below tells the embarrassing story of the data:

Stocks that were supposed to thrive in a Trump administration have significantly lagged the overall U.S. market, on average. One website’s “Trump stocks” gained an average of 41% over the nearly four-year period to October 1 of this year, and the other website’s group gained 45%. Meanwhile, the S&P 500
SPX,
-1.63%

  rose 71% (returns are cumulative, not annualized, and include dividends).

Over the same period, “Clinton stocks” soared, on average. One website’s Clinton stocks gained an average of 184%; in the case of the other, 236%.

Perhaps the biggest error came in predicting how the stock market would react to a Trump victory. Two weeks before the 2016 election, CNN reported that “if Donald Trump wins the election, U.S. stocks… will almost certainly tank.” The network reported that one Wall Street firm was forecasting an 8% drop in that event; a major think-tank predicted a 10% to 15% drop.

In reality, the stock market soared following Trump’s victory. The Dow Jones Industrial Average
DJIA,
-1.43%

 gained 1.4% on the day after Election Day and has kept going up from there.

Predictions are difficult — especially about the future

Though the error of these forecasts from four years ago is extreme, they are not unique in being wide of the mark. When analyzing the stock market’s returns over the past century during Democratic and Republican presidencies, historians have struggled to find statistically significance differences.

As has been widely reported, the stock market has produced modestly superior average gains during Democratic than Republican presidencies. But even this difference appears to be the consequence of a statistical and methodological flaw.

Part of the problem is the same one all forecasters face: predicting is difficult, as they say — especially about the future.

For example, it made perfect sense four years ago that a Trump presidency would be good for coal companies. Candidate Trump had promised that he would reopen coal mines in Appalachia that were closed. Yet the coal company that was on one of the lists of Trump stocks — CNX Resources
CNX,
-0.88%

  (formerly Consolidated Energy) — has lost 34% since the day Trump was elected to October 1 of this year.

Likewise, it was entirely plausible that a Trump presidency would be good for the oil industry. But shares of Exxon Mobil
XOM,
-1.99%

 , also on Trump stock lists in 2016, lost 54% since the day Trump was elected.

Forecasting’s inherent difficulty is only part of the problem. Forecasters have an even bigger challenge when it comes to predicting the market’s reactions to the political parties: those parties’ economic policies are not consistent over time. Over the past 150 years, for example, there have been times when the Democratic Party was the party of limited government and other times when the Republican Party was. Similar flip-flops of the two parties have been the case when it comes to free trade and protectionism.

Indeed, according to some political historians, on every major issue there have been times in U.S. history when the Democratic Party was in favor and the Republican Party opposed, and other times when it was just the reverse. No wonder that forecasters have such difficulty predicting how a president from one party or the other will impact the stock market.

So think hard before acting on the forecasts of which stocks will perform best in a Biden or Trump presidency.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

More:These are the ETFs to help you prepare for a Biden presidency

Plus: Here are stocks that stand to benefit under different U.S. election outcomes



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‘I could live on my Social Security and still save money’: This 66-year-old left Chicago for ‘calming’ Costa Rica — where he now plans to live indefinitely

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Editor’s note: This article was first published in September 2019.

A school break changed 66-year-old Martin Farber’s life forever.

In 2007, his daughter — who at the time was attending Illinois State University — decided she wanted to spend a college holiday volunteering in Costa Rica and staying with a local family, he explains. She came home raving about the experience, so, in 2008, Farber — who at the time was living in Evanston, Ill., just outside Chicago, and selling cars — took his first trip there.

“It was a big surprise to me — bumpy roads, dogs barking in the streets,” he says. “I wasn’t enamored at first.”

But as his daughter began traveling there more and eventually moved there for a year, he took additional trips to Costa Rica. It quickly grew on him — in particular, the people. “The Costa Rican people are warm, open and friendly. I felt less invisible in a strange country in a strange town where I didn’t speak the language than I did in Evanston.”

And the more time he spent there, the more it impacted him: “On one of my trips there, I thought: My daughter’s life makes more sense than mine,” he says. “There was nothing wrong with my life, but I felt that my life was out of context with who I’d become. … I would have bills and make money to pay them, but that had ceased to be satisfying,” he recalls. “I knew I needed to change my life — there was no more joy in what I was doing.”

What’s more, when he’d return from his Costa Rica trips, people noticed. “I would come back, and my friends and therapist would say: You seem better after you go,” he says with a laugh.

A view from the hot springs near Martin Farber’s home in Costa Rica.


Martin Farber

So in 2014, he packed up and moved to Orosi — a picturesque, lush small town with waterfalls and hot springs a little over an hour’s drive from San Jose — promising himself he’d stay for two years. It’s been five, and he now plans to stay in Costa Rica indefinitely. (Though Farber notes that, to him, “it’s not a retirement; it’s a chance to lead a new and different life.”)

Here’s what his life is like, from costs to health care to residency to everyday life:

The cost: While many expats spend way more living in Costa Rica, Farber says: “I could live on my Social Security and still save money.” He says “a person can live on $1,200 per month, two people on $2,000.” The key, he says, is to live more like he does and as the Costa Ricans do — in a modest home, eating local food and purchasing local goods.

Indeed, Farber himself spends just $300 a month for rent (he rents a home from a friend who moved recently and gave him a good deal), roughly $225 a month on groceries and just $50 a month total on water and electricity (the temperate climate in Orosi means you rarely need heat or air conditioning). The veteran Volkswagen
VOW,
+0.96%

 
VLKAF,
+0.98%

salesman saves money by not owning a car (those over 65 ride municipal buses for free), which can be a significant expense in Costa Rica; for his cellphone, “I pay as I go … roughly $10 may last me a couple weeks or more,” he says, adding that “many people handle there their cellphones this way. You can get them recharged anywhere.”

His major expense is travel: He goes back to the U.S. to visit his mother in Florida several times a year and lately has spent part of the summer in Chicago helping out a friend with a dealership there. He also spends a good amount of money on health care. He says that while flights can be had for as little as $350 roundtrip during offseasons, the cost can be much higher the rest of the year.

In the saddle.


Martin Farber

Health care: Farber, who has permanent resident status in Costa Rica, says he pays about $90 per month to participate in the country’s health-care system — adding that the health care he’s received has been very good. (A 2018 study of health-care quality and access in more than 190 nations ranked Costa Rica No. 62.)

When he developed a detached retina, though, he paid for the procedure out of pocket so that he didn’t have to wait for the required surgery, he says — adding that the entire procedure cost him about $5,000. “I would have had to have waited four days,” he says, if he had not paid to expedite matters. “That might have been fine, but it might not.” And he adds that the quality of care depends on where you get it in the country.

Lifestyle: Though Farber says that he “moved here with no goals and no agenda,” he’s found plenty to do. “I take Spanish lessons two days a week for two hours a day. It’s been great. I never thought I would acquire a usable language in my 60s,” he says. He also rides his bike all around the area, does some writing and belongs to a community group that undertakes projects to improve the area.

And he often simply takes in nature, which he says has been an essential part of why he feels calmer and more relaxed in Costa Rica than in the U.S. “I live at 3,000 feet but in a valley surrounded by coffee fields and lime trees and water. At night, if I open the windows, I can hear the river rushing by,” he says. “It is very calming … hundreds of trees everywhere … you know the Earth is alive.”

The historic Iglesia de San José de Orosi.


iStock

Cons: “I don’t want to overglorify. It’s not without its problems,” Farber says of Costa Rica. “There are social problems and downsides.” He notes that crime and petty theft can be a problem (“I am cautious,” he says of his approach) and seem to have increased since he moved there, and adds that he misses out on some cultural things because of where he lives. And, he says with a laugh, “I can’t order Thai food at 9 at night.” But, he adds: “These are trade-offs — in the afternoon, I get to walk in the coffee fields and see flocks of parrots.”

Residency: To qualify for Costa Rica’s pensionado visa, expats must prove that they have a pension of at least $1,000 coming in each month. (Here are the details of that program.) Once you have lived in Costa Rica for three years, you can apply for permanent residency. Farber used a lawyer to help him figure out the ins and outs of residency options; his entire path to permanent residency took about a year, he says.

The bottom line: “After five years I am still amazed and surprised that I made the decision to lead a life I never thought I would,” he says. And while he may not stay in Orosi forever — “the town doesn’t have an ambulance, [and] I don’t know what it will be like to be 80 there,” he says — he does plan to stay in Costa Rica in no small part because of the people and sense of community. “I have the feeling that life is good here,” he says. “It’s hard sometimes, but we are all in it together.”



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Mutual Funds Weekly: These money and investing tips can help you read the market’s signs and stay on your path

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