Well, folks. We’ve nearly made it. The election is roughly 24 hours from being over. And with that will come a new person sitting in the Oval office – oh, and…the end of a bajillion political ads peppering our televisions!
Having advised investors for nearly 20 years, I’ve seen this all before.
With each election cycle, without fail, countless advisors, financial news outlets and of course, your know-it-all (INSERT: relative’s name here) will try to predict how the stock market reacts after the election depending on who wins the presidency.
Thankfully, we here at blooom have the real inside scoop on how to president proof your portfolio. Just follow this one piece of advice: RELAX.
Now, you may be thinking to yourself ‘I just don’t see how that protects my investments.’ So, I will explain a bit further: cooler heads always prevail. It is true that certain stocks may go up or down in value differently depending on which candidate is elected and how their legislative initiatives impact certain markets. However, these swings in value are just simple and normal market corrections (see: 401ks aren’t life or death. BUT they can feel like it. So go with me here for a second).
Consider the macro trend of stock market returns based on the party in control of the White House. From 1853–2015, the average annual returns during an election year were nearly identical regardless of which party won the election, coming in around 11 percent. With a track record as long as this, it is evident that the presidential election has little to no long-term effects on the stock market.
Yes, the election may have a short-term impact on stock market returns. But the best strategy for long-term growth is to just hold onto your investments through tumultuous times, such as what could occur when this election concludes. Making a wrong guess and trying to get ahead of the market could cost you a lot more in the long run than potentially avoiding short-term volatility.
So, regardless for how the market reacts on Wednesday, relax. Because, guess what everyone’s going to do the day after the election? We are all going to get up and go to work. The stock market returns after the election will be what they will be.