As we are now within 90 days of the upcoming presidential election, we have been receiving more and more questions about how the market is likely to react between now and election night - and certainly thereafter, depending on the results. While none of us knows with certainty what will happen, we can lean on historical research for some measure of prediction.
Click here to see a statistical presentation of market returns during and after presidential election years. The key takeaways from our research are as follows:
- It is difficult to identify systematic return patterns in election years. That is, there is no reliable pattern to market returns despite what you might hear, read, or believe.
- On average, market returns have been positive in both in election years and the subsequent year, regardless of the winning political party.
- Market expectations associated with election outcomes are embedded in security prices.
- Short-term market volatility creates an opportunity for strategic rebalancing and greater long-term returns. (Much like we saw in March due to COVID-19, we may be presented with another opportunity to "buy low and sell high.")
With so much uncertainty in the world today, it is easy to become concerned or overwhelmed by the worst-case scenario. Our guiding investment strategy focuses not on timing short-term market volatility, but instead, exploiting it for long-term gain. Each of us has an equity-based investment portfolio consistent with our appetite for risk (volatility). If you think you might have too much equity exposure, give us a call for further discussion. Otherwise, enjoy the ride, and you'll be rewarded for doing so in the end.
Your team at Hurlow Wealth Management Group
John, Mike, Gordon, Joe, Derek, Laura, Dona, Stacey, and Sue