With another election cycle upon us, it is a good time to reiterate the importance of staying in the market, regardless of who is in the White House.
While it is natural to feel some stress about how your investments will be affected by elections, history tells us they have little to no effect on stock market outcomes.
• Markets have risen whether a Democrat or Republican has been in office – Every election cycle seems to have unprecedented challenges, but the market continues to grow. From 2008 through 2020 (a period of multiple presidencies from both parties) the S&P 500 produced a total return of 236%. $1,000 invested in that same S&P 500 in 1933 would be worth over $21 Million today.*
• Markets, while volatile during primary season, tend to rise strongly thereafter – The stock market has returned 11.3% in the 12-month periods following primary elections vs. 5.7% for the same periods in non-election years.
• Election cycle volatility creates buying opportunities – Long-term investors can capitalize on this volatility by entering into new positions or adding to existing positions at lower price points. This short-term volatility has historically led to larger gains for investors holding the positions long-term.
• Investors moving into cash (or staying in cash) through an election cycle experienced inferior returns – Historically, movement from the stock market into money market funds has been more than twice as much in an election year than in the year following an election. Not surprisingly, being out of the stock market does not make long-term investors more money.
All of this reinforces the fact that political preferences should not play a part in our financial decisions. At Curran, we discount the short-term commotion and noise of election season. Our focus is providing our clients with the long-term growth required to meet their financial goals.