Melanie D. from Harrisburg, PA asks: Hi Mitch, I’m admittedly getting a bit jittery with the election smothering the headlines this week. The instability and uncertainty surrounding it all makes me wonder how markets could remain relatively calm. I’m not thinking about selling any of my positions, but I could use a bit of reassurance about the road ahead. Thank you.
Mitch’s Response:
Thanks for writing, Melanie. Many people are feeling uneasy about the U.S. presidential election – a feeling that’s likely to last at least several days, if not weeks. A general sense of uneasiness is totally understandable.
I appreciate your stance about not selling any positions because of the election or the results. I think this is the correct mindset. It is rarely necessary or prudent to adjust your investment strategy because of an election. Investors should participate in the democratic process by casting a vote, not by making a trade.1
As I’m writing my response to your question, the election results are still unknown. This may be the case for some time. But don’t let election uncertainty be a rationale for shifting your portfolio’s allocation or changing your investment strategy. The market responds to changes in earnings expectations and economic growth fundamentals over time, not to changes in political leadership. If the new president enacts a raft of policies that directly impact earnings and growth fundamentals, there will be time to adjust investment portfolios accordingly. But we’re at least a few months away from that point, regardless of who wins.
How to Leverage Election-Driven Market Volatility
Election results may capture attention, but it’s earnings expectations and economic fundamentals that fuel long-term growth.
Our guide, “Using Market Volatility to Your Advantage2,” reveals how investors can harness market turbulence during times like these to refine strategies and seek strong returns over time—insights shaped by decades of experience.
This guide explores:
- How market volatility can “shake up” complacent investors
- Potential bargains that may be uncovered through turbulence
- Why volatility may help prevent overheating and market “bubbles”
- What history shows us about opportunities for steady investors in turbulent markets
- Plus, more ways you may be able to benefit from a volatile market
Download Our Guide, “Using Market Volatility to Your Advantage”2
In terms of the time needed to declare a winner, history suggests the markets can handle a period of political uncertainty. In the Bush-Gore 2000 election, it took 35 days for the Supreme Court to end recounts and declare Bush the winner. In that time, the S&P 500 fell -4%, but that was also a period when the technology bubble had burst. The Nasdaq 100 and S&P 500 Technology sector had sold off by double-digits, pulling markets down in aggregate, but non-Technology sectors held up relatively well.
In 2020, it took four days to call the race, and in that time 10 of 11 S&P 500 sectors moved higher. Stocks continued to rally as court cases contesting the results mounted, and the bull market continued throughout January and the first quarter of that year, despite the insurrection at the Capitol.
To calm your nerves, I’d recommend trying to stay focused on fundamentals. Data last week showed the U.S. economy expanding at a 2.8% annual pace in the third quarter, with a 3.7% year-over-year jump in consumption. These are solid figures. The jobs number disappointed with just 12,000 new jobs added in October, but hurricanes and the Boeing strike had a negative impact. The trendlines continue to show a U.S. labor market on solid footing.
Market volatility may be elevated in these coming weeks, but don’t let it rattle you. Election outcomes don’t determine market returns over the long term, economic and earnings growth do.
That’s why now is an ideal time to consider how to make volatility work in your favor. Our guide, “Using Market Volatility to Your Advantage3,” draws on decades of insights to help investors refine strategies and uncover potential opportunities for strong returns during uncertain times.
Download our guide to get insight into:
- How market volatility can “shake up” complacent investors
- Potential bargains that may be uncovered through turbulence
- Why volatility may help prevent overheating and market “bubbles”
- What history shows us about opportunities for steady investors in turbulent markets
- Plus, more ways you may be able to benefit from a volatile market
If you have $500,000 or more to invest, download this free guide today by clicking the link below.
Disclosure
1 J.P. Morgan. November 1, 2024. https://www.jpmorgan.com/insights/markets/top-market-takeaways/tmt-the-final-stretch-your-top-three-us-election-questions-answered
2 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion.
3 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion.
DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.
Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.
This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Index composition is reviewed on an annual basis in December. An investor cannot invest directly in an index.