If you’ve been feeling a little uneasy about what’s happening to your investment portfolio during an election year, you’re not alone.
Every four years during election season, heads start spinning with all sorts of stock market warnings and predictions based on who will win the White House. And while some of this noise may seem trivial, elections do, in fact, occasionally affect the perception of the U.S. economy and how well it performs.
So much uncertainty often leads to worry. Will taxes go up? What will happen with health care? How will new policies affect my investments? With all these unanswerable questions, it can be tempting to make impulsive decisions or do the opposite – nothing at all.
It’s important to remember that how well stocks perform during an election year has more to do with the economic climate than with which candidate is elected. In fact, data suggests that, historically, all the hysteria is unfounded: Unless there’s a recession to blame, stock market returns become only slightly weaker than normal during an election year.
Democrat or Republican: Does It Matter?
The short answer to this question is no. While the party that wins the presidency will have a significant impact on many areas, your stock portfolio is probably not one of them. The perception that Republicans are more business-friendly, and therefore better for the stock market, is skewed. On the contrary, since 1900, the Dow Jones industrial average has had average gains of 6.7% annually during a Democratic administration, compared to 3.5% during a Republican one.
Our #1 Piece of Advice
The most critical piece of advice investors should remember during an election cycle is to avoid making impulsive moves. Knee-jerk reactions to election year stock predictions won’t do your investment portfolio any good. Unless you have a crystal ball, it’s almost impossible to anticipate the ebb and flow of the stock market. Rather than try to guess what's going to happen next and how it will affect your portfolio, you’d be better served by focusing on investment strategies that are within your control.
Block out all the election year noise and stay your current course, or make adjustments to your portfolio based on sound investment strategy – not emotions. For help with your investments, contact Hanscom Investment Services.† Call 800-656-4328, ext. 2236 to set up a free consultation with a financial consultant.
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†Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Hanscom Federal Credit Union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Hanscom Investment Services, and may also be employees of Hanscom Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Hanscom Federal Credit Union. Securities and insurance offered through LPL or its affiliates are:
Not Insured by NCUA or Any Other Government Agency / Not Hanscom Federal Credit Union Guaranteed / Not Hanscom Federal Credit Union Deposits or Obligations / May Lose Value