Elections

Hi, my name is Matt Daley and welcome to the Financial Success Academy. With it being an election year, politics are at the top of many people's minds. In this episode, we want to talk about what the election means for the markets and for your portfolio.

Regardless of where your views fall on the political spectrum, it's a very natural emotion to wonder how a presidential administration may impact financial markets and your investments. However, you may be surprised to learn that historical data shows that sitting presidents have had a relatively small impact on overall market returns. Stock and bond markets are influenced by many broad economic factors, and stocks have trended up through both Democrat and Republican administrations.

The important thing to understand is that when you invest in the market, you're investing in companies, not in a political party, regardless of who's in office or what regulations or tax rates are in place. Companies have historically adapted to remain profitable, and as investors in these companies, we all get to participate in those profits over the long term.

The same principle is true when it comes to Congress. Regardless of which political party has control of Congress, companies have consistently found ways to grow their businesses and make a profit. Some people incorrectly assume that election years themselves have a larger impact on financial markets than they do. Based on historical data, this is simply not the case.

Since 1926, the US stock market has experienced an average annualized return of 10.2% in election years, compared to 10.1% in non-election years, and bonds have averaged an annualized return of 5.5% in election years, compared to 4.9% in non-election years. Making investment decisions based on political events or your expectations for an election outcome is a market timing strategy that could be detrimental to your long-term portfolio performance. There will always be volatility in financial markets in the short term, but reacting to that volatility and altering your long-term investment plan could significantly increase the chance that you miss out on the subsequent recovery and lose out on significant investment gains.

Your investment strategy should always be based on your personal situation and goals and never on who holds political office. The best thing you can do to increase your long-term investment performance is to stay in your seat and stick to your long-term strategy. I hope you found this video helpful. If you have specific questions about any of the information we've covered or questions about your specific situation, please call our office and we'd be happy to provide you with unbiased and fiduciary financial advice. Thanks for watching and stay safe.