2020 | Q3

What effect do elections have on the stock market?

We are sure you are all aware, there is an election coming up. Contentious elections such as the one we are about to face are sure to cause uncertainty in the stock market. While volatility is likely in the short term, we still need to remain focused on the long term. Here are some election-related data from Charles Schwab’s Chief Investment Strategist, Liz Ann Sonders.

Remain Invested
“If an investor had invested $10,000 starting in 1900, but only had it in the Dow when Republicans were president, it would now be worth nearly $99k. On the other hand, that same $10,000 would have grown to nearly $430k if it was invested only when Democrats were president. Seems like an obvious decision to make then. Not so fast. That same $10,000 in 1900 would have grown to more than $4.2 million if the investor had remained in the market the entire time, regardless of which party has presidential power.”

“We’ve often said that the economy impacts elections more than elections impact the economy.”

Below is a chart that shows every president since 1900-color-coded by their party affiliation-and the Dow’s performance during all four years of each election cycle.

“Don’t just look at the averages on the bottom though; look at the range of outcomes. Assuming you know your history, it’s clear that there have been myriad significant impacts on market performance that had little-to-no relationship to the party in the White House (some examples include WWII, the Crash of ’87, 9/11 and the Global Financial Crisis)”.

What this data tells us is that it may be riskier to make drastic changes to your investment strategy based on presidential outlooks. Instead we will continue to stay invested, look for good value, and provide some downside protection where we can.

As always, we remain available to meet (or talk on the phone) if you would like to review your current portfolio. We thank you for the trust you have placed in us and look forward to many more years of working together.

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