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It’s an Election Year. Do the Markets Care?

Denise Williams, CPA, CFP®

06/06/2024 — Download

It’s an election year and investors are nervous, fearing the impact on their portfolios of the next elected president. Many consider this election one of most important in history, and given the polarization among American voters and the 24-hour news cycle, investor concerns are heightened.

It is understandable that, given the expectations, investors are concerned about the impact of the candidates’ policies and politics on their portfolios. Election results can impact government policy, tax laws, foreign relationships, immigration and more. And certainly, fear of a negative impact on our portfolios is highest during an election season; we don’t like uncertainly or unpredictability, heightened this year by issues around inflation and Federal Reserve policy.  It can be a stressful time and easy to become discontent and react emotionally. But history tells a different story: The markets have not only survived, but thrived, providing positive stock market returns to investors who stayed invested, through 83% of all election years.

Presidents take a lot of heat and blame for stock market performance while they are in the Oval Office. But any impact they might have is indirect and marginal. Consider that a president is in office for four to eight years, a very short time period when it comes to investing. As well, any policies that might have an impact take years for implementation and face ongoing legal challenges, so their effect on the financial markets is diluted even more, even if they are able to get something approved.

What really affects the market?

Productivity, globalization, technology revolutions, interest rates, inflation, corporate earnings, economic growth: The market is a complex financial system with many influences. A president elected for four years doesn’t affect the market like these drivers. American ingenuity, our ability to create products and services that improve the quality of life here and around the world: That’s the biggest driver of the markets.

A study from First Trust reveals that in the last 24 election years, from 1928 to 2020, 20 of the 24 years (83 percent) have seen market prices rise—and prices have risen an average 11.58 percent.   The only four years where there were overall negative returns—1932, 1940, 2000, and 2008—were marked by significantly disruptive events: the Great Depression, World War II, the dot-com bubble bust, and the bank crisis or Great Recession. Staying invested in times of volatility is key to any successful financial plan. The historical data, as presented by the First Trust study, shows us that over the long term financial markets don’t really care who the president is or which party controls Congress.

Another positive indicator for markets is Wall Street’s preference for gridlock. A divided government as we have today, where different parties control the executive and parts of the legislative branch, signals stability. Markets perform better when they are not concerned about a radical shift in policy; they want stability and checks and balances of a house divided support that. The September and October months leading up to an election are typically volatile, but after a decision in November, uncertainty is resolved, and the markets continue to look forward.

A long-term view

We are reminded first of all of the importance of voting, but also of staying in the market regardless of your concern about either party winning. Presidential terms are short, and in the long run economic growth and American innovation are what matters. Do your best to ignore the heightened media discourse and contentious election-related chatter, ads, and text messages. While politics can evoke strong emotions, stay focused on your long-term financial goals. Take comfort in the reality of positive market returns in 20 of the last 24 election years, returns that have averaged more than 11 percent.

As always, it’s time in the market that matters, not short-term events. Emotions are not useful when it comes to investing. You can take a lot of comfort in American ingenuity and the products and services we produce for the world. For reassurance, talk to your advisor to ensure that your portfolio is in line with your time horizon, risk tolerance, and long-term goals.


The information included in this document is for general, informational purposes only. It does not contain any investment advice and does not address any individual facts and circumstances. As such, it cannot be relied on as providing any investment advice. If you would like investment advice regarding your specific facts and circumstances, please contact a qualified financial advisor.

Any investment involves some degree of risk, and different types of investments involve varying degrees of risk, including loss of principal. It should not be assumed that future performance of any specific investment, strategy or allocation (including those recommended by HBKS® Wealth Advisors) will be profitable or equal the corresponding indicated or intended results or performance level(s). Past performance of any security, indices, strategy or allocation may not be indicative of future results.

The historical and current information as to rules, laws, guidelines or benefits contained in this document is a summary of information obtained from or prepared by other sources. It has not been independently verified, but was obtained from sources believed to be reliable. HBKS® Wealth Advisors does not guarantee the accuracy of this information and does not assume liability for any errors in information obtained from or prepared by these other sources.

HBKS® Wealth Advisors is not a legal or accounting firm, and does not render legal, accounting or tax advice. You should contact an attorney or CPA if you wish to receive legal, accounting or tax advice.

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