The Markets and Presidential Elections

Presidential Elections and the Stock Market

With only a few weeks left before the presidential election,  it's important to consider how presidential elections can influence the stock market and the economy.  Insights from a study by U.S. Bank highlight several key trends that can guide our approach during this pivotal time.

Historical Trends

Historically, the stock market has experienced fluctuations during election years. Uncertainty about potential outcomes often leads to increased volatility as investors react to changing political landscapes. This uncertainty can create both risks and opportunities in the market.  Let’s face it—the stock market typically gets very volatile around periods of uncertainty.  Elections can bring in the possibility of campaign policies turning into actual laws with significant impacts on both the economy and the markets.

Market Reactions

In the lead-up to elections, market performance can be erratic. Investors tend to grapple with concerns about policy changes and economic implications based on which candidate is likely to win. This anxiety often results in market pullbacks or surges, driven by speculation.  For example, look at what Donald Trump’s stock, Trump Media & Technology Group Corporation, ticker symbol DJT, has done in the last month:

Source: Seeking Alpha (10-17-2024) - https://seekingalpha.com/symbol/DJT

However, once the election concludes and clarity emerges, markets generally stabilize. Historical data shows that post-election periods often bring recovery as investors adjust to the new administration's policies and priorities.  Just remember, two of the most important factors that can move the markets the most are our nation’s GDP (Gross Domestic Product, aka “our economy”) and inflation.  There are probably thousands, if not millions of data points that move the markets in one direction or the other and in my opinion, it is entirely too simplistic to say that the markets are going to move up or down based on who wins the upcoming election.  

Here is some historical data from the U.S. Bank study that you may find interesting:

Source: U.S. Bank Asset Management Group: https://www.usbank.com/investing/financial-perspectives/market-news/how-presidential-elections-affect-the-stock-market.html

Strategic Considerations

As a financial advisor, I advise a proactive approach:

1. Stay Informed: Keeping abreast of political developments can help you anticipate market movements and make informed decisions.

2. Diversify Your Portfolio: A well-diversified portfolio can cushion against volatility and position you for growth across various sectors and time horizons. 

3. Focus on Long-Term Goals: While short-term market fluctuations may provoke anxiety, maintaining a long-term perspective can help us navigate through the noise and focus on your investment objectives.  This is why we believe so strongly in The Bucket Plan process.

4. Engage with Us: We encourage you to reach out with any questions or concerns. We are here to provide personalized advice tailored to your financial goals.

Conclusion

Investing around presidential elections requires a keen understanding of historical trends, sector sensitivities, and market behaviors. By staying informed and focusing on long-term strategies, we can navigate this election cycle effectively.