By Jason LaBarge, Financial Advisor and President of LaBarge Financial
The stage is set for another Biden-Trump showdown in the 2024 U.S. presidential election. While there might be mixed reactions about the rematch itself, there is some concern among investors about what will happen with the stock market. Over half of surveyed investors say they’re worried the presidential election may impact the performance of their portfolios. Some of this stock market fear can be attributed to news headlines touting market mayhem, which can cause emotions to cloud people’s financial decisions. Fortunately, much of the nervousness about the stock market in an election year is misplaced because historical trends show a different reality.
History Provides a Positive Market Outlook
Contrary to popular belief about markets being down during election years, historical data shows markets have actually risen during presidential election years, with the S&P 500 recording positive returns in 83% of the 24 election years since 1928. So, while election years create economic uncertainties, history is on our side when it comes to the stock market. The bottom line is that as an investor, you should approach an election year much like any other year. If the stock market dips, don’t allow fear to cause you to pull out of your investments. Conversely, don’t jump the gun and buy in as soon as the market rises.
Market Performance Is Not Contingent Upon the Party in Power
Think about how many times during an election year you’ve heard statements like, “This is the most important election ever,” or “Democracy is on the ballot!” Investors often think market performance depends on whether a Democrat or Republican wins the election. They’ll point out that the average return during election years from 1928-2016 was 15.3% when a Republican was elected and only 7.6% when a Democrat took office. However, this doesn’t take into account that the average return across all of those election years was 11.28%. Who gets elected and how it will impact the market is mostly noise because the reality is the candidates themselves have little direct influence on the markets.
Policies Have More Impact Than Presidents
Investors must understand that enacted policies have more market influence than the candidates themselves, and it’s the decisions candidates make about specific industries that create shifts in the market. For example, former President Trump is big on import tariffs, tax cuts and strengthening the U.S. military, while President Biden is focused on student loan forgiveness, green energy tax cuts and limitations on how businesses impose fees on customers. Investors need to pay attention to significant policy changes and not just election results.
Navigating the Road Ahead
Even if you’re not an investor, pay attention to the policies each candidate is proposing and how that may affect your finances. Don’t hesitate to seek help from a financial professional if you feel you don’t have a solid grip on your money. My biggest advice to investors? There’s no need to fear what will happen with the market based on the outcome of the election. Regardless of who wins, you need an investment strategy that works for your unique situation. As you’re working with your financial advisor to adjust your investment portfolio, be mindful of the language they use about the election. Remember that a good financial advisor who has your objectives and goals at heart will not allow partisan bias to influence how they advise you.
Risk Disclosure: Investing involves risk including the potential loss of principal. No investmentstrategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Securities offered only by duly registered individuals through Madison Avenue Securities, LLC (MAS), member FINRA/SIPC. Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. MAS and LaBarge Financial are not affiliated entities. AE Wealth Management LLC provides services without regard to religious affiliation and the views of individual advisors are not necessarily the views of AE Wealth Management. 2312546-03/24