Friends,
In little over a week, the nation will head to the polls to elect a new President in addition to deciding 13 gubernatorial races, 34 Senate seats and all 435 House of Representatives seats. Election years typically bring a lot of uncertainty and anxiety, and many people worry about the effect of elections on their investments. We appreciate those concerns and have provided a link below to an article which provides an excellent resource for analyzing the facts around elections and their historical impact on the economy and financial markets.
Our top takeaways from the research are as follows:
- The U.S. economy is a massive and complex system, and we cannot credit or blame presidents for everything that occurs in the economy. The President’s powers are limited by our Constitution and just because their ads say they’re going to do something…..it doesn’t mean they’ll be able to deliver on their promises.
- Stock market returns, especially over time, are driven by the fundamentals of the companies that are listed on the public exchanges: Revenues, earnings, growth rates, etc. It just doesn’t make sense to assign an outsized weight to the influence of a political party on markets whose primary drivers are well outside the bounds of politics.
- Time in the market (vs. timing the market) has proven to be a winning strategy for long-term investors. Based on actual history, making big moves to either buy or sell based on who’s in office would have been a big mistake for most investors.
We totally understand and agree that elections are critically important to you and to our country…but history tells us that while elections may have short term impact on markets, there is little evidence that they have impacted market returns over time.
Please feel free to reach out to us if you’d like to discuss this further.
Matt & Andrew
Party in the USA: Election Facts (schwabassetmanagement.com)