Since the beginning of November, investors have become increasingly concerned about the 2024 presidential election in the United States and its potential impact on their portfolios, with more than half (61%) of investors stating that they consider it a concern, according to the latest Investopedia reader survey results. This concern was the highest among respondents, followed by worries about the war in the Middle East, potential recession, and inflation.
These findings roughly align with other survey results, as half of the investors surveyed by Nationwide also said they expect the presidential and congressional elections to have a greater impact on their portfolios than market performance.
When broken down by party, Republican investors were slightly more likely at 68% to say they expect the presidential election to have a direct, immediate, and lasting impact, compared to 57% of Democrats.
History Points to Positive Market Performance During Election Years
Although past performance is not necessarily indicative of future returns, studying market performance in past elections may be encouraging for concerned investors.
Historical data suggests that markets tend to rise in presidential election years, with the S&P 500 recording positive returns in 20 of the 24 election years since 1928, or 83.3% of the time.
The average returns for those election years were 11.58%, according to numbers from First Trust. This significantly outpaces the average S&P 500 return of 9.81% for all years since 1928.
Filtering Out the Noise and Focusing on Fundamentals
“Elections may seem like a major issue right now, but historically they have not had a significant impact on the trajectory of the economy and the market in the end,” according to J.P. Morgan strategists, who said that “while volatility may increase with uncertainty surrounding election day, stocks tend to move forward as uncertainty fades.”
Dennis Chisholm, Director of Quantitative Market Strategy at Fidelity Investments, stated that investors “should not make major changes to their portfolios because of elections,” noting that investors “should be very cautious in assuming that any concern surrounding the upcoming elections may be indicative of future returns.”
Strategists from New York Life Investments remarked that they “expect the 2024 elections, like their predecessors, to include both political noise and real political change” and “encourage investors to tune out the noise as it does not affect economic or market outcomes.”
John Lynch, Chief Investment Officer at Comerica Wealth Management, said, “While attention-grabbing political headlines and rising geopolitical tensions affect investor sentiment, the focus should be on the fundamentals of high interest rates, moderate inflation, and recovering earnings to keep diversified long-term portfolios on track to meet their investment goals.”
Source: https://www.investopedia.com/investors-election-year-worries-could-be-overblown-experts-say-8410521
Leave a Reply