How are you feeling about this year’s elections?

If the thought of it makes your heart beat faster––you’re not alone.

Most United States residents across party lines experience major stress around presidential elections.¹

And recently, that stress has skyrocketed.

In 2016, about 1 in 2 people said they were stressed out and anxious about the presidential election. And by 2020, more than 2 in 3 people were feeling election stress.¹

Why?

Political hostilities and increasing divides on party lines are partly to blame.¹

So is the uncertainty of it all.

It can be overwhelming and really exhausting not knowing how an election will shake out or if things will go the way we want. 

And, unfortunately, all of that isn’t limited to who wins the White House. An election year can raise real concerns about market trends and our finances.

In fact, about half of of investors are worried about how the 2024 elections will affect their portfolios.³

Are those fears valid?

Does a presidential election year cause market instability? And is that instability based on a Democratic or Republican win?

Here are a handful of facts about the markets in and around presidential election years.

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Over the last century, we’ve had 25 presidential elections. In 82% of those elections, the stock market has seen positive returns. That means only 18% have had negative results.⁴

The graphs below show the average stock market returns for each presidential election year from 1928 to 2020. ⁵

History has shown that year three after a presidential election tends to be associated with the strongest market performance. In fact, from 1928 to 2016 year three in a presidency has positive market returns.⁴

That may be tied to the fact that year 3 is when early years’ work, like newly written legislation, is finally passed. It can also be when a president starts thinking about reelection and setting the stage for campaign strategy.

Here’s how market returns have generally fared in each year of a presidency from approximately 1928 to 2016.⁴

Historically, the S&P 500 returns tend to be lower with a Democrat elected to Presidency versus a Republican. In fact, as the table below shows, from 1928 to 2016 the positive returns tend to double when Republicans are elected as president. .⁶

Notably, positive returns tend to occur regardless of party affiliation—and it does matter who controls Congress.

That’s because the markets don’t typically like one party to sweep the Presidency and Congress, with either Republicans or Democrats controlling it all. That tends to cause short-term volatility. Instead, the markets usually prefer checks and balances and the stability of divided government.⁷

Political passions and parties aside, the U.S. economy has grown over the last century, regardless of whether a Republican or Democrat is sitting in the White House. That’s meant trillions in economic growth, making the U.S. economy the largest in the world—despite party affiliations and political divides.⁸

In elections and the markets, there are no absolutes or certainties. Several diverse and highly complex factors from inflation and recessions to conflict abroad, unrest at home, and more can affect market activity and how elections unfold.

As helpful as trends and forecasting may be, remember, nothing’s set in stone until it actually happens. So when it comes to both elections and the markets––your choices matter.

Did you already know any of those facts about elections and the markets?

Which one(s) surprised you the most?

No matter how you answer those questions, the truth is both elections and the markets can come with some built-in uncertainty. And that’s OK.

Still, both elections and the markets run on cycles. And no two cycles in either area ever look exactly the same.

Why?

Because countless factors affect elections and the markets.

And it’s not just about political parties and who wins the Presidency. Current events, foreign policy, and so much more can come into play.⁷

Trying to account for it all can be dizzying.

It can also get in the way of prudent choices, especially if we end up trying to time the markets or make money moves based on political preferences or predictions.

That’s why it’s important to focus on the facts—and have some simple strategies for dealing with election stress and market turbulence.

To do that, you can start as simple as limiting your media intake and time on social media around elections. You can also steer clear of political talk or debates, even with those who are “on the same side” as you.

With that, it also helps to keep your eyes on the big picture and check in with the people you trust.

When you do, you can get a fresh perspective and invaluable advice for weathering the next political storm or any volatility in the markets.

Sincerely,

    Andy Barkate, M.S.

    California Retirement Plans

    https://calretirement.com/

    (661) 491-1111

P.S. Sign up for my emails. My subscribers get my best insights!

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Andy Barkate, M.S.

California Retirement Plans

https://calretirement.com/

andy@calretire.com

(661) 491-1111

Content prepared by Snappy Kraken. 

We are an independent financial services firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives.

California Retirement Plans (CRP) is a financial planning firm. Investment and/or securities advice or transactions are not provided by employees of CRP. CRP is not a securities dealer. CRP does not offer investment, tax or legal advice. You should consult with the proper professional for these matters. Any discussions of investments, legal matters or taxes should be concerned incidental to the financial and retirement planning process.

All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Please note, it is not possible to invest directly into the S&P 500® Index; this measure is provided solely as a gauge of overall market performance. Standard & Poor’s: “Standard & Poor’s®,” “S&P®,” and “S&P 500®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”). The historical performance of the S&P 500 is not intended as an indication of its future performance and is not guaranteed.

Our firm is not affiliated with nor endorsed by the U.S. government or any governmental agency. AEWM provides services without regard to political affiliation and the views of individual advisors are not necessarily the views of AEWM

This guide is provided for informational purposes only; it is not designed as advice for an individual’s personal situation. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.  Our firm does not provide, and no statement contained in the guide shall constitute, tax or legal advice. All individuals are encouraged to seek the guidance of a qualified professional regarding their personal situation. 

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