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During election years investors tend to be a bit more concerned about the stock market than in non-election years. Depending on which candidate wins, many people believe the stock market could be in big trouble, perhaps heading for a major downturn. With all the negative political ads, it’s easy to understand why investors on either side feel this way. Surprisingly, history tells us that presidential elections have little effect on stock market returns, regardless of which party wins. That’s not to say 2024 won’t be different, but let’s look at the historical facts.
Fidelity published an interesting article in early October that had some great points about the correlation between the US markets and election years. Since 1950, the stock market has risen by an average of 9.1% in election years. The average return in the market the year following the election is 8.3%. The article states, “This points to the presidential election not being a notably ‘market-moving’ event.” This reminds me of an expression we use quite often: “It’s not timing the market, it’s time in the market.” This is a perfect example; it may feel like an election year is a good time to make changes in your portfolio or switch the strategy but history doesn’t support that logic.
At OmniStar, it’s all about discipline and rules. We follow our rules-based approach, even during election years. An election year doesn’t change what we do or how we do it. Long-term success is best achieved by following a long-term plan and avoiding major changes based on information from news outlets. That doesn’t mean set it and forget it. On the contrary, our process helps us avoid extreme shifts in any direction. We believe this methodology helps us achieve better than average risk adjusted returns.
Of course, past performance is not a guarantee of future results, but we believe sticking to a plan and following our time-tested rules can potentially increase performance. For those of you who are worried about the outcome of the presidential election, OmniStar provides a second opinion service designed to illuminate the blind spots and encourage adjustments when needed. Whether you, or someone you know who is worried about the market, please encourage them to contact us and we’ll talk with them about some of these points and help them create a plan for success. Our team is here for all of you and anyone you care about.
