The Impact of Elections on Investing
As the 2024 presidential election heats up, investors may be feeling anxious about the potential impact on the economy and the stock market. However, history shows that election results have minimal long-term correlation with market performance. Here’s why you shouldn’t let election headlines dictate your investment decisions:
Market Performance Under Different Parties
- Equity returns have been similar under both Democratic and Republican presidents since the Great Depression.
- On average, the Dow Jones Industrial Average has grown by 7.7% under Democratic presidents and 7.9% under Republicans.
- Stock market returns have been positive during 78% of presidential terms since 1932.
Key Drivers of the Stock Market
While elections may create short-term volatility, larger factors influence the stock market and economy:
- Interest rates and monetary policy
- Valuations and corporate profits
- Employment and the financial health of consumers
- The global economy and geopolitics
Investment Strategy for Election Season
Instead of letting election anxiety drive your investment choices, consider the following:
- Expect some volatility as the election approaches.
- Review your long-term investment plan.
- Rebalance your portfolio accordingly.
- Commit to staying invested regardless of the election outcome.
Remember, history shows that investors who stay the course and remain invested through election cycles tend to fare better in the long run. Don’t let short-term political events derail your long-term financial goals.
About the Author
David Rosenstrock, CFP®, MBA, is the Director and Founder of Wharton Wealth Planning. With an MBA from the Wharton Business School and a B.S. in economics from Cornell University, he is a CERTIFIED FINANCIAL PLANNER™ dedicated to helping investors navigate the complexities of the financial markets.
***
David Rosenstrock, CFP®, MBA, is the Director and Founder of Wharton Wealth Planning (www.whartonwealthplanning.com ). He earned his MBA from the Wharton Business School and B.S. in economics from Cornell University. He is also a CERTIFIED FINANCIAL PLANNER™.