Don’t Let Politics Derail Your Investment Strategy
The current political landscape surrounding the United States presidential election is certainly polarizing. With so much buzz and partisan opinion around which candidate proposes a better future for the United States of America, no topic is more relevant and meaningful to voters than the strength of the economy. However, it is important to note the president does not control the stock markets, the stock markets operate independently of the economy and policies implemented by the president.
Election years generally come with heightened market volatility as institutions and retail investors speculate on which party will gain control. Given the already elevated levels of volatility we have experienced since the COVID pandemic, heightened levels due to the election are less pronounced. We expect this volatility could increase leading up to November 5th.
Speculating on the stock markets based on your political affiliation is a losing strategy. Dating back to 1950, and using an all-stock portfolio represented by the S&P 500, if you invested solely when a Democrat was in office you would have had a 5.11% annualized return. If you had invested exclusively during a Republican presidency, that annualized return would have been 2.80% (1). Both numbers are far below the total average annual return of 8.05%. The best investment strategy is to stay invested, regardless of who is in control of the White House.
History proves the stock markets favor those who stay invested through good and bad times, regardless of who is in power. Dating back to 1928, there is an 86.5% chance your investments represented by the S&P 500 would be positive over a 4-year presidential cycle. If we track 8-year periods, those odds jump to 97% (2). These odds demonstrate the favorable outcomes of disciplined long-term investing.
As your advisors, it is our job to put aside news articles designed to generate political favor and remain diligent investors on behalf of our clients. With that in mind, regardless of who wins the election come November, we will remain focused on the task at hand – providing you with sound advice to make informed decisions and achieve optimal outcomes. History shows patient investors will be rewarded regardless of which political party controls the White House. It is important that you don’t let the commotion of politics derail your investment strategy.
If you would like to revisit your investment portfolio, please feel free to reach out.
Kind Regards,
Howard Levine & Brandon Levine