Elections and the Markets

 

Elections and the Markets

Election season has officially begun with the first presidential debate behind us. This is the earliest we've ever seen a presidential debate, which means a longer election season and potentially heightened emotions and opinions.

 

As a politically divided nation facing significant stakes, we can expect an increase in heated discussions and partisan mudslinging. While strong opinions may stir emotions, it's crucial to stay rational when making financial decisions, no matter how intense the political climate becomes.

 

Market Performance & Election Outcomes

Interestingly, historical data reveals that the stock market has generally performed well, regardless of which political party holds the White House. Since 1936, the S&P 500 Index's 10-year annualized return was 11.2% under Democratic presidents and 10.5% under Republican presidents.

 

The Risks of Party-Based Investing

Despite these statistics, the temptation to invest based on political preferences can be strong. However, history demonstrates that this approach can lead to costly mistakes. For instance, a Bespoke Investment Group study shows that a $1,000 investment starting in 1953 would have grown to $27,400 if invested only when a Republican was in office and to $61,800 with only a Democrat in power. Yet, investors who remained invested regardless of the party ended up with a staggering $1,690,000—proving that staying the course is the best strategy.

 

The Greatest Financial Risk During Election Season

The most significant financial risk during election season is how we react to political uncertainty. Emotional responses to election outcomes can negatively impact investment performance. It's essential to balance strong political beliefs with rational financial decisions, as history has shown that investing based on party affiliation can be a costly endeavor.

 

If the election noise is causing you concern, let's discuss your options. My goal is to help ensure that your financial decisions align with your long-term objectives and goals.

 

Investment advice offered through OneAscent Financial Services LLC, d/b/a Provident Oak Financial, a Registered Investment Adviser with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.

 

1. Capital Group, Standard & Poor’s. Each 10-year period begins on Jan 1 of the first year shown and ends on Dec 31 of the tenth year. Figures shown are past results

and not predictive of results in future periods. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of

the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not

be invested into directly.

2. Bespoke Investment Group, Carson Investment Research, FactSet. Time period 1953-April 2024. The Standard & Poor’s 500 Index is a capitalization weighted index

of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major

industries. All indices are unmanaged and may not be invested into directly.