ELECTIONS AND THE STOCK MARKET

The upcoming presidential election is getting a lot of attention. Pollsters attempt to predict the outcome, and many individuals start to consider what the impact on their investments might be depending on which candidate wins.

The information below illustrates stock market returns related to election years and presidential terms. 

Given this view, it is important to note that markets usually make money under both administrations (the same goes for congressional control, but I didn’t want to include too many charts). We don’t know what the outcome of the election will be, but even if we did, we don’t know what the market will do. Many republicans were concerned during the Obama presidency, yet the markets went up. Many democrats were concerned with a Trump presidency, and markets have also gone up.

Rather than try to predict the outcome and make reaction-based decisions to your investment strategy, history tells us that sticking to a strategy designed around your financial plan is a preferred solution. Usually, that means maintaining exposure to the stock market with the expectation of being rewarded for riding through the ups and downs, while allocating enough money in conservative investments to help bridge the valleys and for shorter-term needs. 

Keep in mind, I am not saying that the President has no impact on the market or the economy, but historically the market has made money regardless, and that’s the point, isn’t it? As Benjamin Graham (who mentored Warren Buffet) noted :

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” 

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