Investors tend to overreact to all kinds of stimulus and every four years, the presidential election brings about some of the worst instincts we see in investor behavior. A deep dive into the data might be of interest.
This chart from Avantis Investors (data from the Ken French Data Library) breaks down market returns for each election year going back to 1928.
In 24 election cycles, average US Stock Market returns from 01/01/1928 thru 06/30/2024, only 4 of those years were negative. The average return was just shy of 12%. But volatility during each of those years was significantly higher, as it has been in the run up to this election. In many of those instances, the bulk of the positive action came after the first week in November… in other words, once the results were known.
That makes sense. The market doesn’t really care who wins the election. What the market really hates is uncertainty and that is why we see higher volatility in the run up to November.
This is why it is so important to have an investment plan, and stick to it. Elections are uncertain affairs by design. And in today’s world with the 24-hour news cycle and social media, it is tougher than ever to keep a cool head. But sticking to your investment plan, despite overblown headlines about this or that candidate, has proven over time to be the profitable strategy.
If you have questions about your plan, do not hesitate to reach out.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.