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Election Jitters: Does the Stock Market Really Care Who Wins?

Election Jitters: Does the Stock Market Really Care Who Wins?

March 07, 2024

The year is 2024, and election season is upon us. As the political landscape heats up, many investors wonder how the election will impact the stock market.

While it's natural to feel some anxiety, history suggests that elections might not be the market's biggest worry. Let's delve into the data and see what we can learn.

Looking Back: A History of (Mostly) Positive Returns

The S&P 500, a broad market index, has performed positively in most election years. Since 1952, the average gain during a presidential election year has been around 7%, according to an LPL Financial study. This may be lower than the average non-election year, but it's far from a disaster.

It's also interesting to note that the party in power doesn't significantly impact returns. Whether re-election or a leadership switch, the market has historically shown resilience.

Beyond the Averages: Factors to Consider

While past performance doesn't guarantee future results, it's helpful for context. However, it's crucial to remember that many factors influence the market, and elections are just one piece of the puzzle. Here are some other things to consider:

  • The overall health of the economy: A strong economy with low unemployment and controlled inflation is generally a positive sign for the stock market, regardless of who's in office.
  • Global events: Political and economic developments around the world can have a significant impact on investor sentiment and market performance.
  • Company-specific factors: Ultimately, individual companies' success depends on their fundamentals, not just the political climate.

Focus on Long-Term Strategy, Not Short-Term Noise

While elections can create some short-term volatility, it's crucial to maintain a long-term perspective when managing your investments. Trying to time the market based on election cycles can be risky and often leads to missed opportunities.

Instead of getting caught up in the election hype, focus on diversifying your portfolioinvesting for your long-term goals, and staying disciplined with your investment strategy. Remember, the stock market has weathered many storms throughout history and is likely to do so again.

Reach out to us with any questions or concerns so we can help put your mind at ease.

David S. Dixon, CFP®

Jacob S. Bierstedt, CFP®, ChFC

#DixonFinancialGroupLV #Stocks&ElectionYear #LongTermGoals #DiversifyYourPortfolio #StayDisciplined