Election Day approaches and with it comes increasing uncertainty and anxiety about the next President of the United States and the future of our country. We’ve been here before. Every four years comes a firestorm of proposals and promises, campaign propaganda and candidate insults. And every election leads investors to wonder whether the US economy would thrive or falter under the leadership of the each candidate.
It’s not surprising to see volatility leading up to a presidential election. The potential impact of each candidate’s proposals will undoubtedly affect the profitability of various industries and companies, and it is difficult for investors to put a value on companies that may be impacted differently depending on who will take office. The stock market doesn’t like uncertainty. Uncertainty breeds volatility, and this volatility and fear of the unknown can cause investors to make emotional decisions that can be harmful to their investment accounts.
Several studies have been done and research published on the trends and correlation between political events and the stock market. Yet while some of these trends seemed to be tried and true in past years, the market has not followed them in recent presidencies, and those that bought and sold on these short-term movements have been disappointed. There have been other factors in play in the last several years as well that have created an unusual environment for the markets, including the oil price and interest rate situations. With pre-election jitters paired with the last few years being out of sync with some of the normal cycles, additional uncertainty is expected through the November 2016 election.
At the end of the day, the candidate that ends up becoming the President of the United States will not have a significant impact on the overall market in the long run. For investors with a long-term approach, the best strategy is to sit tight during the turbulent times, make decisions based on objective and fundamental data, and don’t time the market. After every market dip is an inevitable turnaround, and investors that sell on fear will miss the significant upside. There is opportunity in the market for those that are patient and disciplined. Large upswings usually come at unexpected times, and those that are not invested will miss out on those gains. Sit down with a trusted financial planning professional to discuss your long-term investment strategy and how it fits within your financial plan.