What Elections Mean for the Markets

Did you hear there was an election coming up? I think I drew the short straw in the rotation of blog writing when I ended up with the investing-in-an-election-year topic. Nonetheless, it is probably the most common question we are getting from clients and prospects right now. Should you make any changes to your investment portfolio in an election year?

In short, no. We often talk about avoiding the perils that come with trying to time the market (it’s almost impossible to do consistently), and making moves before or waiting till after election day is market timing. The stock market has remained very resilient no matter what party has been in power.

chart of the markets over itme

Source: Bloomberg. Data as of 9/30/2024

Four Things to Know Today

There will be short-term volatility

Historically, markets tend to react to the unpredictability of elections. Stocks may experience sharp swings as investors react to poll updates, debates, and policy announcements. In the short term, it’s wise to stay prepared for some turbulence. However, history has shown that markets often stabilize post-election, regardless of the outcome.

Maintain a diversified portfolio

A well-diversified portfolio is one of the best ways to manage risk during uncertain times. Diversification across asset classes—such as stocks, bonds, and commodities—can provide a cushion against the volatility that often accompanies election years. Consider spreading investments across industries and regions to reduce the impact of any single sector.

Focus on your long-term goals

Although the election season may provoke emotional reactions, it’s crucial to stay focused on your long-term financial goals. Market volatility can lead to impulsive decisions, but sticking to your investment strategy can often be more beneficial in the long run. Remember that market shifts caused by political events are usually temporary.

It might be a good time to rebalance

If you’ve owned stocks over the past couple of years, that portion of your portfolio is likely a larger allocation than your more conservative holdings. With market fluctuations in play, an election year can be a good time to review your portfolio and rebalance if necessary. Adjusting your asset allocation can help ensure you’re aligned with your risk tolerance and goals, keeping your portfolio resilient during uncertain times.

Conclusion

Unfortunately, there will always be something to worry about, and investors are usually rewarded for patience and staying invested through uncertainty. The U.S. economy is consumer driven and that’s not going to change. We maintain the view that the fundamentals of the economy don’t change overnight, and we don’t think an investment strategy should either.

So, don’t be like Rosie and look back in regret at short-sighted decision-making.

 

dog looking out the back of a car

Thanks for reading, and I think we can all agree we will be happy to see the election in our rearview.

Nathan

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Categories : Financial Planning

Comments

  1. Dan says:

    So will it be a” trick” or “ treat “ after the election?

    1. Nathan Gilbert says:

      We are hoping for a treat! Like maybe a full sized Snickers bar

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