Washington reads like a novel designed for media coverage: The narrative follows classic lines of dramatic literature, with lots of colorful characters, conflicts that build to a major crisis, followed by some form of resolution. We then turn the page, moving onto the next crisis. Each of the chapters in this saga is depressingly similar.
The media may give heavy play to the political angles, but the overall impact on your investments is de minimus. Consider some of the most tumultuous events of the past century: the attack on Pearl Harbor, which led to the United States entering World War II; and the Soviet Union’s launching of Sputnik into space, which kicked the Cold War arms race into high gear. Consider these presidential events: John F. Kennedy’s assassination, Richard Nixon’s resignation, Bill Clinton’s impeachment.
Oh, and the debt-ceiling debate of 2011 and the sequester of 2013.
In none of the above did the markets react unusually. At most, they wobbled a bit before resuming their prior trend. Even the horrific attacks of 9/11, which saw markets closed for almost a week, was followed by a selloff, then a rally, then a return to the prior trend, which was the ongoing deflation of the dot-com/tech bubble.
The lesson for investors is that while these events may transfix us emotionally, they have almost zero impact on corporate earnings. This is the primary factor in driving valuation, and that is what ultimately drives your investment results.