Morningstar Experts: Election Shouldn’t Guide Your Investments

Friday, 28 Sep 2012 08:20 AM

By Dan Weil

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While financial markets are rife with speculation about the impact of the presidential election, investors would do well to ignore it, according to experts at Morningstar.

“[P]eople always find reasons as to why now is uncertain,” John Rekenthaler, vice president of research, says in a forum on Morningstar.com. “There is always an election coming, it was Y2K in 2000, we're in a war, so forth and so on. It never pans out at all” for markets.

For example, before Y2K, many pundits advised waiting to buy stocks until after the event. But stocks actually rose ahead of Y2K and then fell afterward.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

“It never makes any sense” to invest based on these factors, Rekenthaler says.

Russ Kinnel, Morningstar’s director of mutual fund research, notes that financial markets already have taken into account the possible election results.

“I think people fail to appreciate that these things are priced into the market every day,” he says. “And the markets are very efficient that way.”

Even when you know a policy is coming that will affect certain stocks, such as healthcare reform, it’s difficult to make money on it, Kinnel notes. “It's much better to keep applying your plan.”

Still, CNNMoney has formed a list of stock sectors that would benefit from a victory by Barack Obama or Mitt Romney.

Obama is bullish for healthcare, scientific research, alternative energy and housing. Meanwhile, Romney is bullish for defense, telecommunications, financial services and transportation, according to CNNMoney.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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