As you prepare to vote in the upcoming election, it’s natural to let your view of the economy influence your decision. However, the President’s actual control over the economy is more limited than most people realize, and the effect of a presidential election on investments is typically minimal.
Whether you’re voting for Kamala Harris or Donald Trump, history shows that elections rarely cause significant long-term shifts in capital markets. While market volatility often increases around election time, the stock market has consistently risen over the last century, with a few exceptions, such as the Great Depression, World War II, the tech bubble burst in 2000, and the Great Recession of 2008.
As an investor, this means that while election results may impact policies and regulations, your best bet is to stick with a sound strategy developed with a trusted financial advisor, rather than reacting to political changes.
Power Has Limits
First, let’s refresh our knowledge about what the President can and cannot do when it comes to the economy. Presidents are usually awarded praise or denounced as failures depending on the state of the economy during their tenure in the White House. But the economy is a complex, many-faceted system, and the President has more influence over some aspects of the economy than others.
While the stock market and the economy are not the same thing, markets can reflect certain elements of the state of the economy. In reality, the President doesn’t truly have as much control over the stock market as many think (although the choices they make can certainly have short-term effects on investor confidence and market performance, particularly on certain securities and sectors).
For example, history shows us that the stock market performance at the beginning or end of a President’s term in office isn’t necessarily indicative of their choices. It may have more to do with the naturally occurring cyclical nature of market performance, socio-political changes, or a myriad of other factors which can impact the market’s performance.
Research tells us that there is no trend driving the market returns of a particular political party, and the President probably shouldn’t receive much credit or blame for stock market performance during their term, as evidenced below in the hypothetical growth of $1,000 invested in the S&P 500 since March 1933 until June 30, 2023.
Source: Forbes
As you can see from the chart above, the party in power didn’t have as much impact on the markets as events that occurred like the Great Depression, World War II, the tech boom in the late 1990s followed by the crash in 2001, and the Great Recession in 2008 followed by the recovery.
The President does influence proposing fiscal policy (i.e., tax law) and regulatory policy, appointing Federal Reserve governors, and responding to external shocks and crises. But do you see anything in common with these things? That’s right—you don’t have any control over them. But you do have control over some very important pieces of your financial puzzle, pieces that matter more than who wins an election.
Control What You Can
All elections are important, but with a solid financial plan in place, elections are a “non-event” when it comes to your finances. Here’s what you can focus on amid everything going on in our world:
Your goals. You set your goals for a reason. Remind yourself of the “why” behind them and remember what’s most important to you. Don’t let the noise of the election derail what you are working toward, and don’t abandon your plan just because you haven’t lived through times like these before.
Your perspective. The markets are always changing. If you check your portfolio performance every time there’s a shift in the markets, you could end up feeling overwhelmed and stressed. If you maintain a long-term perspective and stay disciplined in your approach, you’ll likely feel confident in your plan.
Your choices. One of the most important rules in investing is to refrain from making emotional decisions. Multiple studies have analyzed how our emotions affect our investing results, especially when we chase above-average returns. Instead of panicking, follow the guidance of your financial professional. This is just one blip of many that will come on your journey of pursuing your life goals and your advisor has the expertise and experience to walk you through it.
Talk to a Trusted Advisor
How are things going for you right now during this election season? Feeling uncertain? Or are you resting easy because you’ve taken the time to create a solid financial plan?
If you don’t yet have a personalized financial strategy or are unsure if your current plan can handle life’s challenges, we’re here to help.
Contact our team at Premier Planning Group by calling our office at (443) 837-2520 or emailing my executive assistant, Talia Grover, at taliagrover@premierplanninggroup.com to set up a complimentary consultation.
About Brion
Brion Harris is the CEO, founder, and managing partner of Premier Planning Group, an independent financial firm specializing in working with pre-retirees and retirees, helping them create customized wealth preservation and retirement distribution strategies. With over 20 years of experience, Brion has developed deep knowledge and skill in helping his clients simplify their finances and find confidence in their financial future. Brion and the Premier Planning team are known for their unparalleled client service and their dedication building long-lasting relationships with their clients. As a result, Brion has been the recipient of the #1 Advisor Leadership Award* at Summit Brokerage Services for eight years running and has a reputation as one of the top retirement advisors in the business.
Brion is a proud 20-year resident of the Annapolis community, where he resides with his wife, Elizabeth, their three children, Addison, Jay, and Scarlett, and their two dogs, Pepper and Coco. When he’s not working, you can find him boating, skiing, traveling, and enjoying good food and music with his family. If you want to learn more about Brion, connect with him on LinkedIn.
*The #1 Advisor and Leadership Award is based on production data while at Summit Brokerage Services, Inc. Brion Harris received the award in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021. This award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client.