Linda J. from Aberdeen, SD asks: Hello Mitch, I’m sure I speak for many fellow readers and investors when I say I’m worried about the election and how it could affect the markets. I previously read your column about stock market returns generally being positive during election years, but I’m wondering if you have any additional advice for navigating this turbulent time. Thank you!
Mitch’s Response:
Thanks for sending in your question, Linda, and let me assure you that you’re not alone in feeling a bit unsettled about the upcoming election. In a recent survey conducted by the American Psychiatric Association, 73% of respondents said they felt anxious about the election. Your sentiments are shared.
Speaking from my decades of experience as an investment manager, it’s this type of swirling emotion and concern that can morph into an investor’s worst enemy. I’ve seen time and time again investors make knee-jerk, emotional decisions that are based on gut feelings versus economic or earnings-based fundamentals, the results of which can be catastrophic.1
Learn How to Navigate the 2024 Presidential Election
As the 2024 presidential election approaches, the stakes are high—not just for the country, but for your investment portfolio. In these unpredictable times, it’s crucial to base your investment decisions on solid data and strategic insight rather than emotions.
To help you do this, I recommend reading our exclusive guide, Stock Market Returns in an Election Year2, to get insight on:
- How stocks have performed in every election year since 1928
- The effect on performance when an incumbent runs for re-election
- How 2024 has compared to election year averages so far
- And more…
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Get Our FREE Guide: Stock Market Returns in an Election Year 2
As I write in my column about stock market returns and U.S. presidential elections, I strongly urge investors to keep a healthy distance between political sentiment and the investment decision-making process. Changing an asset allocation or getting out of the market for political reasons could mean paying a steep opportunity cost.
A clear case-in-point is displayed in the chart below. Over the past 70 years, if someone had only been invested in the S&P 500 during years when a Republican was president, or only years when a Democrat was president, the opportunity cost to total return would have been massive. Policies do matter in determining economic outcomes, but they generally do not make or break business cycles or prevent the economy from forging ahead with growth. As it is clear in the chart below, it’s best to keep your investment mindset separate from your political mindset.
In terms of advice I can give you for navigating this period, the main thing to remember when you’re feeling concerned or stressed is to refocus on your long-term objectives. The months leading up to the election represent a very short-term period relative to the goals and objectives you likely have for your portfolio. Remember not to conflate the two, i.e., to use short-term sentiments to determine your long-term approach to investing.
Once the election outcome is decided, and the market gains more clarity on policy priorities and the likelihood of new policies being enacted, that will be a better time to assess the impact on the economy and markets. But I see little sense in trying to guess what those are today and instead urge a patient and steady approach in the coming months.
To navigate these uncertain times effectively, it’s essential to draw insights from historical trends. By examining market performance from previous elections, you can identify patterns and better understand how political events have influenced the markets in the past.
Our free guide, Stock Market Returns in an Election Year3, provides insights into historical market performance during election years, including:
- How stocks have performed in every election year since 1928
- The effect on performance when an incumbent runs for re-election
- How 2024 has compared to election year averages so far
- And more…
If you have $500,000 or more, get your free copy of this special report today—and invest smarter during this election year!
Disclosure
2 ZIM may amend or rescind the guide “Stock Market Returns in an Election Year” for any reason and at ZIM’s discretion.
3 ZIM may amend or rescind the guide “Stock Market Returns in an Election Year” for any reason and at ZIM’s discretion.
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