November 1, 2009 
What do you think about government intervention: in our health care system, in the auto industry, in our economy in general? Whether you feel good, bad or indifferent about it, many clients (and I) have been concerned about the impact it might have on the stock market. Is more government bad for investors?
Before you decide, I encourage you to invest five minutes to enjoy a fascinating presentation by Dimensional Fund Advisors Vice President Weston Wellington, “Government Intervention and Stock Returns.”
Weston analyzes past returns and data from other countries in which government intervention in the economy has waxed and waned. His conclusion? The evidence shows that more or less socialism has NOT been a major factor in determining stock market returns. It seems there are simply too many other factors with which it competes for it to have a major impact.
This does not, of course, tell us with any certainty which stocks, sectors or asset classes are going to be the winners or losers in our economy and our country. Government policy-making activities will continue to combine with the other factors that result in stock pricing, which means the future will continue to be a big, fat unknown. In light of the uncertainty, I encourage my clients to continue building and maintaining globally diversified portfolios designed to track their individual goals and risk tolerances — and to continue to vote for whomever they feel will do the best job with all the rest.
