Navigating Investments During Election Season: Stay the Course

As the 2024 election draws near, it's natural to feel uneasy about how the outcome might affect your finances. However, don’t let sensational headlines sway your investment decisions. Politicians may come and go, but the markets keep moving. History shows that staying invested pays off, even amid election-year jitters. Here are three reasons why keeping your investments steady is the smart move.

1. Party Affiliation Doesn’t Define Market Success

Does it matter which party occupies the White House? In short, no. Historical data reveals that the stock market generally thrives regardless of whether a Republican or Democrat is in office. For instance, Clearnomics found that from 2008 to 2020, the S&P 500 boasted an impressive 236% total return, showcasing robust growth across different presidential administrations.

Economic and political challenges may feel unprecedented, but every election cycle brings controversy and uncertainty. The graph below shows that the market remains resilient regardless of which party is in power. Consider this: from 1933 to 2023, a $1,000 investment in the S&P 500 at the start of Franklin D. Roosevelt’s presidency would have grown to over $21 million by year-end 2023.

2. Volatility Now, Gains Later

Election cycles can bring market volatility, but this often leads to strong gains once they conclude. According to Capital Group, since 1932, markets have surged by an average of 11.3% in the 12 months following primaries compared to just 5.7% during non-election years. While short-term fluctuations are common, they are fleeting. Focus on the potential for growth and remember that long-term investing success relies on riding out these temporary bumps.

3. Stay Invested, Avoid Timing the Market

During election cycles, it could be tempting to move to cash out of fear. However, studies consistently show that staying invested and making regular contributions often outperforms trying to time the market. Shifting to cash risks missing out on gains that follow periods of fluctuation. Patience and discipline are key. Keep your portfolio diversified and aligned with your long-term goals rather than reacting to every political twist and turn.

The Bottom Line: Stick to Your Plan

Political cycles come and go, but successful investing is about sticking to a sound strategy. Avoid letting election fears dictate your financial decisions. Focus on long-term market principles and maintain a diversified approach. Patience and commitment will position you for growth and security, regardless of the political climate.

For tailored advice, consider a free, no-obligation consultation with Fairlane Investment Advisors to refine your investment strategy.