As another election cycle approaches, investors wonder how political outcomes might impact their portfolios. Historical data and market trends suggest that maintaining a long-term perspective is crucial regardless of election results. Elections create short-term volatility, but knee-jerk decisions rarely pay off.
What’s Happening With the Markets
A mass sell-off driven by US economic slowdown and a surprise rate hike in Japan pulled back a strong tech rally. Keeping perspective: the S&P 500 was still up 10% for the year (as of August 6, 2024), and despite an average intra-year drop of 14.2%, annual returns were positive in 33 of 44 years from 1980–2024.
The Urge to React
In 1966, psychologist Dr. Jack Brehm coined “psychological reactance” — the urge to regain freedom when we perceive it’s being taken away. Market volatility can feel that way, but the urge to react doesn’t make it the right move. Keep in mind:
- Markets are resilient — the long-term trend is upward regardless of party.
- Economic fundamentals hold — earnings, rates, and growth matter most long term.
- Diversification mitigates risk — a well-diversified portfolio cushions policy shocks.
- Timing is challenging — the best days often happen during turmoil; missing them costs dearly.
- Long-term trends transcend politics — technology, globalization, and demographics span decades.
What Should You Do?
- Your investment plan is unique and designed to withstand multiple cycles.
- Sticking to your plan insulates you from impulsive losses.
- Use volatility to “buy during a sale” and rebalance.
- Stay informed, but limit exposure to the 24-hour news cycle.
We’re Here For You
Successful investing is about time in the market, not timing the market. Elections create short-term noise but rarely alter the long-term trajectory of well-managed companies and the economy. If you need a second opinion or a sounding board, reach out.