We all know that politics can be a very volatile endeavor, impacting emotions and plans and day to day life. For many, presidential elections can be overwhelming and cause a lot of concern around the future of their financial planning. The good news? History shows us that while elections can cause changes in financial policy, they tend to not have a strong impact on the market.
Not convinced? Read on for some more insight into what we’ve seen historically.
Presidential Election Years Tend to Start Strong
…And carry these returns through the entire year. Historically, the first half is weaker followed by a stronger second half. Q3 tends to be particularly strong in presidential election years. Looking at 2024, we see a departure from this trend in that H1 2024 has been very strong. Regardless, this data helps to show that it’s important to stay the course when it comes to presidential election year investing.
Morningstar as of 8/31/24. Stock market represented by the S&P 500 Index from 1/1/70 to 8/31/24 and IA SBBI U.S. large cap stocks index from 1/1/26 to 1/1/70. *includes QTD 2024 returns (7/1/2024 – 8/31/2024). Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You cannot invest directly in the index.
Source: Morningstar as of 8/31/24. U.S. stocks are represented by the S&P 500 TR Index from 3/4/57 to 8/31/24 and the IA SBBI U.S. Lrg Stock Tr USD Index from 1/1/26 to 3/4/57, unmanaged indexes that are generally considered representative of the U.S. stock market during each given time period. Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You can not invest directly in the index.
Time in the market tends to matter more than political party.
Consistency is also shown to be preferable when we look at investments over time – against who is in power. When it comes to financial planning, it’s more important to be reliable and consistent with your investments, staying the course through the ups and downs or politics. Remember – many of your financial decisions are based on long-term goals and your financial plan should be built to withstand some volatility.
Source: Morningstar as of 8/31/24. Stock market represented by the S&P 500 Index from 1/1/70 to 8/31/24 and IA SBBI U.S. large cap stocks index from 1/1/54 to 1/1/70. Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You cannot invest directly in the index.
In the end, that is the best lesson to take from historical returns – both during presidential election years and others. Financial decisions should be based on goals and long-term plans, not fears and concerns about what might happen. In the face of uncertain times, it’s best to stay the course. That said, it’s important to remain aware of the policy changes that may come from a new administration and keep in touch with your financial planner about how these changes could impact your personal plan.