Elections Myths
What do presidential elections mean for your portfolio?
Should you change your investing strategy based on who wins?
Elections bring a lot of noise, and I wanted to dispel some market myths around this election.
Myth #1: Elections usually bring big market swings.
You would think elections cause major market shifts (given all the politicking and intense emotions).
However, history shows that elections historically don’t influence market performance as much as the economy does.
Growth, inflation, corporate profits, and other business and economic trends usually have a stronger effect on the stock market.1
The president and Congress impact markets through the laws they pass and decisions they make, which are more powerful influences than elections alone.
Myth #2: Markets perform better with one party in power.
You might have heard that markets perform better under Democrats or Republicans.
History shows that markets have performed well under both parties.2
Interestingly, you can see from the chart below that stocks have historically performed best under a “divided” government when neither party controls both Congress and the White House.
Myth #3: The “election cycle” means I should change my investment strategy.
You might have heard of the so-called “election cycle,” where markets are supposed to follow a consistent pattern every four years.
The chart below shows S&P 500 performance since 1950.2
You can see that there isn’t a consistent pattern to performance, with both negative and positive years over time.
However, on average, markets have been generally positive each of the four years.
Emotions are high, and changing your strategy ahead of a contested election can be tempting, but it’s not a good idea.
Truth: Elections are just one factor affecting markets over the next few weeks and months.
We can expect volatility around the election, but traders are also analyzing a lot of other factors:
- The Federal Reserve’s path to rate cuts
- Inflation and economic data
- Geopolitics and conflicts overseas
And much more.
Truth: Tax laws and regulatory changes may impact markets in 2024 and 2025.
With many provisions of the Tax Cut & Jobs Act (TCJA) scheduled to expire at the end of 2025, tax policies are something we’re monitoring closely.3
International trade issues may also influence markets, for example, supply chain problems.
Bottom line: Elections can bring uncertainty, so we’re watching carefully.
We don’t know how the election results will play out over the coming months and years.
So, our portfolio management team is staying flexible, watching the trends, and making careful shifts where needed.
Click here to learn more in latest vlog post on this topic.
Do you have any questions? Schedule a call today or just email us at fullcircle@bertramfinancial.com
Sources
2. https://www.fidelity.com/learning-center/trading-investing/election-market-impact
3. https://tax.thomsonreuters.com/blog/what-to-know-about-tcja-expiration/
Chart sources:
https://www.fidelity.com/learning-center/trading-investing/election-market-impact
| Please note, it is not possible to invest directly into the S&P 500® Index; this measure is provided solely as a gauge of overall market performance. Standard & Poor’s: “Standard & Poor’s®,” “S&P®,” and “S&P 500®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”). The historical performance of the S&P 500 is not intended as an indication of its future performance and is not guaranteed. This chart is not intended to provide investment, tax or legal advice. Be sure to consult a qualified professional about your individual situation. This chart does not take into account investment fees, so actual results may be different than depicted above. |
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