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Brett Arends's ROI

Oct. 2, 2020, 12:32 p.m. EDT

Trump’s COVID-19: What the latest election turmoil might mean for your 401(k)

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By Brett Arends

Wow. As if the election campaign couldn’t get any crazier, now Donald and Melania Trump announced they have COVID-19 .

Like any decent person, I wish them both healthy and speedy recoveries. Ditto White House adviser Hope Hicks, who has also tested positive—and, indeed, everyone else who gets this horrible virus. Like most of you, I know people who’ve lost family and friends to COVID-19 and I’m sure there is more to come. Already one million have died world-wide , including apparently more than 200,000 here in the United States.

Where this leaves the political campaign is a subject I’ll leave to others. But if it causes any further election turmoil, the subject here is what that might mean for you, your investments, and your retirement portfolio.

As it happens I was already been looking at what any election turmoil might mean for your investments, following president Trump’s recent warnings he might dispute the results if he suspected electoral fraud.

And the same conclusions apply, but even more so.

In a nutshell: If the election causes any market turmoil ahead, that’s going to be good news, at least for your investments (it may be bad news for other reasons).

The reason? Warren Buffett, as usual, put it best. “Only those who will be sellers of equities in the near future should be happy at seeing stocks rise,” he wrote in the 1997 Berkshire Hathaway annual report . “Prospective purchasers should much prefer sinking prices.” Buffett compared us ordinary investors to people who eat hamburgers but don’t own cattle, or people who buy cars but don’t make them. We should want beef and cars to be cheaper, not more expensive. Our reaction to rising stock prices while we are investing “makes no sense,” he wrote.

A quick reminder: Buffett has built a fortune of $80 billion , entirely from investing in stocks. So he probably has a fair idea what he’s talking about.

And Ron Guay, an adviser in Sunnyvale, Calif., tells me that if there are any bumps ahead investors should stay focused on how long they may have until retirement.

For many of his clients, he says, it’s 10 or 20 years. So they’re adding money to their investments, not taking it out.

“If the market does decline materially as a result of a disputed election (or for any other reason under the sun),” Guay says. “This means that you are accumulating shares at discounted prices,” and that is “a good thing,” not a bad one.

Even before the latest news, investors were trying to digest the implications of president Trump’s comments about a possible disputed election.

This had caused a lot of breast-beating in the media. But there was reason to suspect the comments were said only for effect.

Trump, after all, is a master at playing the media, dominating the story line, and changing the subject. Around this point in the election cycle four years ago he was threatening to lock Hillary Clinton up in jail if he won. Instead, the only people who ended up taking a perp walk were people on his side, like Paul Manafort, Michael Cohen and Roger Stone. But his threats back then served their purpose, completely changing the story line from the Access Hollywood tapes .

Meanwhile, how much do we know about what a seriously disputed presidential election would mean for markets? We have exactly one data point to draw on: The election in 2000, between George W. Bush and Al Gore.

During the political turmoil that followed Bush v. Gore, and the saga of the “hanging chads,” Roger Stone’s infamous “ Brooks Brothers ” fake riot, and the successful Republican bid to stop the Florida recount, the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.59% fell nearly 10% and the Nasdaq Composite  /zigman2/quotes/210598365/realtime COMP +0.55% plunged nearly 25% at one point. And safe havens rose: Gold /zigman2/quotes/201432642/composite GOLD +0.80% rose as much as 4%, at one point, and long-term Treasury bonds /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -2.46% rose nearly 7%. With the benefit of hindsight, your smart move on the day of the election was to sell all your tech stocks and buy long bond funds like Vanguard’s Long-Term Treasury Bond /zigman2/quotes/201786083/realtime VUSTX +1.73% fund.

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