In this clip from Motley Fool Answers, the cast welcomes Fool historian Matt Trogdon onto the show to talk about past presidents and important lessons for investors.
This time, their focus is the folly of trying to predict what will happen to the specific companies based on the upcoming administration. For those who are already buying and selling based on what they predict Trump will do, consider how the expert views failed to pan out for Obama, Bush, and Clinton.
A full transcript follows the video.
This podcast was recorded on Nov. 8, 2016.
Alison Southwick: Now time for a history lesson. You've got a few examples, here, of some stocks that were supposed to take off after certain people were elected and then, spoiler ...
Robert Brokamp: It didn't happen.
Matt Trogdon: It didn't work out that way.
Trogdon: Going back to the last three elections in which we ushered in a new president. So most recently President Obama elected first time in 2008. Analysts thought that alternative energy companies would do well. Folks thought that the Obama administration would be bad for stocks. So since Obama's been president (I think I looked at it around February 1 of the year he was inaugurated through yesterday), the iShares Clean Energy ETF has gone from $15.23 a share to $8.89 ...
Southwick: Oops. That's the wrong direction.
Trogdon: ... so that went down. Chevron, meanwhile, has gone from $60.71 up to $105.29 and Bank of America, of course, has gone from about $4.00 a share to about $16.67. So the Obama administration not terrible for Bank of America.
Trogdon: Going back to 2000 when George W. Bush was elected, there was a belief that his term would be beneficial for bank stocks and for drug companies, and actually, the two companies I looked at, here, are two of the first stocks that I ever bought ...
Trogdon: ... JP Morgan Chase. And there's an aside. When I bought this, I called my broker and said, "I'd like to buy JP Morgan," and he said, "Well, it's JP Morgan Chase." And looking back on it, thank you for adding so much value. Get the point, right?
Southwick: How old were you?
Trogdon: I was in college, I think.
Southwick: Oh, OK.
Trogdon: Yeah, so during the Bush presidency, JP Morgan Chase dropped, actually, from $46.67 down to $31.53 and then the second company I owned shares of at the time was Pfizer, and Pfizer dropped from $45.00 a share to $17.71. And again, that was during an administration that we thought would be beneficial to banks and to drug companies.
And then finally during the 1992 election, when Bill Clinton became president, there was the belief that he was going to remake the healthcare system at that time, and so the thought was that drug companies would get hurt there. Instead, the aforementioned Pfizer increased almost 800% in value in Clinton's presidency, Merck jumped 300%, and Johnson and Johnson jumped 385%. So those are three instances where the prognosticators got it wrong.
Brokamp: It's difficult, because investing is, in and of itself, a prediction. You're buying a stock because you're making a prediction that it's going to be worth more.
Trogdon: Oh, sure.
Brokamp: But history has shown it's a very difficult game, and you just hope that people who made these brave prognostications had more investments in their portfolio other than these stocks. I hope, for example, you had something other than Pfizer and JP Morgan in your portfolio, Matt.
Trogdon: I think I did, yes.
Southwick: Early learning experience.
Trogdon: My family had invested stuff for me, but those were two of the first that I had picked. I think it just goes to show the difficulty with taking one event, whatever it is, and trying to boil it down and saying it's going to be good for one particular type of stock. And then investing in that, right? I mean, you're committing a whole host of investing sins by doing that.
Trogdon: I'll tell you a funny story of someone I talked to, because you know you work at The Motley Fool and everyone always wants to talk investing. And someone I talked to recently -- maybe it was a year ago -- said, "Hey, what do you think about medical marijuana stocks? I mean, I really think they're going to go up."
I'm like, "Man, I don't know. I haven't given it any thought." But you see that, right?
Alison Southwick has no position in any stocks mentioned. Matt Trogdon has no position in any stocks mentioned. Robert Brokamp, CFP owns shares of Johnson & Johnson. The Motley Fool recommends Chevron and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.