Macroscope | US presidential primaries: Iowa delay a reminder for investors to steer clear of election volatility

The unusual results delay in the Iowa Democratic caucus, which kicks off the race for the White House, is a reminder that investors should tune out the sound and fury of the long election process, and focus on fundamentals

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Audience members listen at a Democratic caucus rally in Iowa. Photo: Reuters

Published: 12:00pm, 8 Feb 2020Updated: 12:00pm, 8 Feb 2020

This past week has not gone as expected. By the time of writing, I had thought, surely I would have something insightful to say about the upcoming United States presidential election.

However, as a result of a lack of results from the Democratic Party’s Iowa caucuses, I know precisely what I already knew at the start of the week. There is a parable in there somewhere about relying too much on one event to make investment decisions, or about overinterpreting data from a small sample size – a lesson I wish US pollsters and political pundits would learn too.

As frustrated as I am about the Iowa caucuses, I should take a deep breath and remember not to let how I feel about politics overrule how I think about investing.

The race for the White House officially began on Monday. I know it feels like it has been going on for at least a year. But officially, it kicked off in frigid Iowa at 7pm on February 3. And it began not with a bang, but with a chaotic whimper.

The primary process is complex, and different in the two main US political parties, but the simplest explanation is: before the nationwide election for the president in November, each party holds its own mini-election in each state to decide who will be on the ballot in November.

First up in the US presidential primaries is the Iowa caucus. I have a sentimental attachment to caucuses, having participated in my first at the age of four, but even I have to admit it is a pretty awful way to pick a president. It is slow, confusing and always chaotic. A caucus requires all supporters to gather in a physical location in each of the state’s precincts and be counted.