In today’s Steady Investor, we break down the top factors shaping the current market and what may lie ahead, including:
- A look at the past U.S. presidential election
- U.S. private sector activity signals economic acceleration
- Federal Reserve cuts rates by 0.25%
It’s Time for Investors to Look Past the U.S. Presidential Election – The U.S. presidential election likely stirs strong emotions in many readers. Some were elated, some greatly disappointed. When it comes to investing, however, these emotions must be set aside. History makes it clear that the stock market has no political preference. The chart below drives this point home. If a person invested money in the stock market only when their preferred political party was in the White House, it would have meant severely reducing total return over time. This is true of both Democrats and Republicans. Investing for the long-term—regardless of who was president—clearly delivered the best result.
Are You Protecting Your Retirement Investments in Today’s Economy?
Current factors, such as inflation and political uncertainties, pose a potential threat to your portfolio. And after years of building your retirement savings, it’s crucial to protect it from these risks.
Now, more than ever, having a resilient strategy to protect your financial future is essential.
We recommend our free guide, How Solid Is Your Retirement Strategy?’, which covers key investment approaches to support your financial security, including:
- The importance of flexible portfolio allocation
- Why keeping some liquid assets can potentially help you preserve more wealth
- Understanding your risk tolerance in case of a market downturn
- Plus, more strategies to help you protect your retirement assets
If you have $500,000 or more to invest, get our free guide by clicking on the link below.
Get our FREE guide: How Solid Is Your Retirement Strategy?2
Indeed, the stock market tends to perform well over time no matter which party controls the White House. Since 1957, the S&P 500 Index has delivered an annualized return of +9.3% under Democratic presidents and +10.2% under Republican presidents.This is not to say elections have no impact on markets or the economy. They of course do—the president influences and sometimes establishes economic policies, and these can impact how businesses generate profits and invest. But these types of impactful policy changes do not take place immediately—there is plenty of time to assess how campaign proposals take shape as actual policy, and/or whether many of the ideas floated on the campaign trail get watered down substantially or scrapped altogether.
Private Sector Activity Shows the U.S. Economy Accelerating – Amid the noisy news cycle surrounding the U.S. presidential election, many investors may have missed the fresh batch of strong economic data we saw this week. Importantly, U.S. services activity—which accounts for most economic output in the U.S.—accelerated in October from the previous month. According to the Institute for Supply Management (ISM), services activity rose from 54.9 in September to 56.0 in October, bolstered by rising employment. The ISM indices tell us about the breadth of growth—not the magnitude—so we can say for sure how accretive this may be to economic output. But we at least know a majority of companies that participate in the survey are reporting expansionary activity, with 14 industries reporting growth in October compared to 2 in September. Looking more broadly, the Bureau of Economic Analysis reported that U.S. GDP expanded by 2.8% in Q3, essentially marking a continuation of the second quarter’s 3.0% pace.
The private sector also showed strength in this report. When we strip out the impact of increased government spending and look just at private sector contributions, we see that U.S. GDP expanded at a 2.5% annualized rate in Q3. That’s up from the 2.2% private sector pace set in Q2.3
The Federal Reserve Cuts Rates by a Quarter Percentage Point, As Expected – The Federal Reserve’s September meeting featured a somewhat surprising 50 basis-point rate cut. The November meeting went exactly as investors had expected. The Federal Reserve cut the benchmark fed funds rate by a quarter percentage point, to a range of 4.5% to 4.75%. Recent inflation reports continue to suggest that the Fed’s 2% target is well within reach, and softening trends in the labor market indicate that rising wages are no longer a key driver of inflation. The three-month average of payroll gains in the private sector is 67,000, which is the lowest since 2020. To be fair, the impact of the hurricanes and the Boeing strikes impacted the October jobs figures substantially, which is a factor the Fed weighs. But overall, the Fed sees relatively stable employment, strong consumer spending, and falling year-over-year inflation rates. These data have given them wiggle room to move rates lower from here.4
How to Protect Your Retirement in This Economy – Today’s market volatility is inevitable, but you can take steps to protect your retirement assets from its effects. A strategy that anticipates potential risks is key.
Our free guide, How Solid Is Your Retirement Strategy5, provides the insights you need to prepare for what lies ahead and strengthen your retirement plan, including:
- The importance of flexible portfolio allocation
- Why keeping some liquid assets can potentially help you preserve more wealth
- Understanding your risk tolerance in case of a market downturn
- Plus, more strategies to help you protect your retirement assets
If you have $500,000 or more to invest, get our free guide today!
Disclosure
2 ZIM may amend or rescind the guide “How Solid Is Your Retirement Strategy?” for any reason and at ZIM’s discretion.
3 Wall Street Journal. November 5, 2024. https://www.wsj.com/economy/u-s-services-sector-accelerates-on-employment-boost-509a52f0?mod=economy_lead_story
4 Wall Street Journal. November 3, 2024. https://www.wsj.com/economy/central-banking/fed-prepares-rate-cut-2024-election-99ec0333?mod=economy_feat2_central-banking_pos1
5 ZIM may amend or rescind the guide “How Solid Is Your Retirement Strategy?” for any reason and at ZIM’s discretion.
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