History suggests that investors shouldn’t be concerned about material asset return differences under different political administrations. A portfolio of 60% equities and 40% fixed income has produced an annual compound return of 8.1% since 1860 with a Republican president and a 7.8% annual compound return with a Democratic president.

A globally diversified portfolio of 60% stocks and 40% bonds declined about 16% in 2022—a painful period for balanced investors that raised doubts about the viability of this strategy*.  Some commentators even declared the old standby dead.

Implementing an investment strategy is often presented as a choice based on whether a fund is labeled “active” or “index.” Those labels are important, as they convey pertinent information about funds. However, I believe it’s more important that investors consider the characteristics behind those labels. Doing so can strengthen investors’ conviction about why they might include active and index funds in their investment plan and can increase their chances of success.

Investments in AI are unlikely to ward off a near-term U.S. economic slowdown or justify rich stock valuations.