With Election Day just around the corner, the constant headlines and varying opinions have left many feeling uncertain and anxious about the outcome. We understand your concerns and the potential impact the election results may have on your well-being. In times like these, it’s essential to step back, focus on what we can control, and maintain a long-term perspective.
We’re pleased to share insights from Dimensional Fund Advisors, in their articles titled “Presidential Elections: What Do They Mean for Markets?” and “Bulls, Bears, and Ballots: When Looking at Politics and Markets, Think Long Term.” These pieces align with our philosophy at Silver Oak and provide a calming outlook on how elections influence markets.
Perspective: What Do Elections Mean for Markets in the Long Term?
It’s almost Election Day in the US once again. While the outcome may be uncertain, one thing we can count on is that plenty of opinions and predictions will be floated in the days surrounding the vote. In financial circles, this will inevitably include discussion of the potential impact on markets. But should elections influence long-term investment decisions?
Stocks have rewarded disciplined investors over the long term, through Democratic and Republican presidencies. Making investment decisions based on the outcome of elections, or how investors think they might unfold, is unlikely to result in reliable excess returns. On the contrary, it may lead to costly mistakes. Accordingly, there is a strong case for investors to rely on a consistent approach to asset allocation— making a long-term plan and sticking to it.
Exhibit 1 demonstrates that over nearly 100 years of presidential terms, stocks have consistently marched upward, regardless of the administration being Democratic or Republicans controlling the White House.
Exhibit 1
Past performance is not a guarantee of future results.
During a presidential election year, it’s natural for investors to seek a connection between who wins the White House and which way stocks will go. Some may even wonder whether they should get out of the stock market altogether before the ballots are counted. But a look at history may offer some reassurance. Remember, shareholders are investing in companies, not politicians, and stocks haven’t shown much of a party preference.
1 Note that the first two paragraphs are from “Presidential Elections: What Do They Mean for Markets?”
2 Note that the last two paragraphs are from “Bulls, Bears, and Ballots: When Looking at Politics and Markets, Think Long Term.”
As highlighted in these articles, the stock market has thrived under both Democratic and Republican administrations, with history showing no clear relationship between election results and long-term returns. Regardless of the election outcome, businesses will continue to innovate, and we believe the market will keep rewarding patient investors over time.
This newsletter is for informational purposes only. Nothing herein constitutes a recommendation to buy or sell any specific security. Past performance does not guarantee future returns. Investing involves risk.