Many factors can affect the stock market, with the presidential election standing out as a prominent factor. Election years often usher in volatility, especially in the stock market. Throughout history, the presidential election has consistently been highlighted as a key driver of stock prices. If you’re feeling uneasy about navigating the stock market amidst a presidential election cycle this year, we’re here to help ease your mind.
How the 2024 Election Could Affect the Stock Market
Presidential elections often bring about uncertainty. As the elections approach, people often find themselves asking questions such as: Will the economy remain stable? Will the new president positively influence our economy? How will interest rates be affected? Could my investments be at risk if the stock market experiences a downturn?
If you’re asking those questions, you’re not alone. But we want to provide some insight on the four-year presidential cycle stock market to help you gain clarity and peace when it comes to your investments this year.
In their Guide to Investing in An Election Year, Capitol Group found that:
- Historically, the stock market has seen an upward trend whether or not a Republican or Democrat has taken over office.1
- Returns increase to 11.3% in the year post-election compared to non-election years.2
Historically, any presidential election has caused some rollercoaster effects on the market in the day-to-day. But when you look at the year-over-year trends, you’ll see that an election year often outpaces a non-election year when it comes to returns.
How to Invest Well in An Election Year
It can be tempting to pull your investments or sit out on the sidelines in the months leading up to a big presidential election. However, by doing so, they overlook the crucial aspect of investing: the compounding power of interest over time. The uncertainty and volatility of the market based on a highly negative news cycle can be enough to make any investor run for the hills.
Here are some tips on how to invest well during an election year:
1. Stay the course.
Investing well is oftentimes about having the long game in mind. We highly advise against making significant or impulsive decisions regarding your investments in a volatile market. If you’re worried about your investments in the uncertainty of an election year, that’s okay. But we’re here to remind you that the best thing you can do for your finances is to ride it out, stay the course, and keep the long game in mind.
2. Work closely with your advisor.
If you don’t have a financial advisor, now is the time to find one. When you invite a financial professional to join your team, they’re going to have your best interest in mind. They’ll be your sounding board for making well-thought-out investing moves this year and they’ll be able to help you keep your eyes on your long-term goals while navigating the volatility of the market—together.
3. Keep a well-diversified portfolio.
Regardless of whether it’s an election year or not, maintaining a diversified portfolio is always wise. This approach prevents you from concentrating all your investments in one area, thus reducing the level of risk associated with short-term investments. When faced with uncertainty and volatility, sticking to the plan and trusting the long-term process is essential.
Want more confidence in your investments this year? While we can’t give you 2024 stock market predictions, working with a SageSpring Wealth Partner can give you confidence as you continue to invest your resources and make sound financial moves. If you don’t have a financial advisor on your money team, we’d be honored to help.
Chat with a financial advisor in your area today and feel more confident in your investments this election season.
Any opinions are those of SageSpring Wealth Partners and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results.
