Politics and Your Investments
It’s that season again: the season when people worry more about their investments than they otherwise do, because it’s a presidential election year. It’s also the season of media outlets becoming more obnoxious about reporting market volatility, further grinding on investors’ nerves.
I have some good news to share and some tips to help retain your perspective through the next few months. First of all, remember that the economy and financial markets are much larger than politics. The economy is driven by consumption. Markets are driven by earnings of companies. Whether Republicans or Democrats fill seats, people will still spend money putting food on the table, buying laundry detergent, filling prescriptions, putting gas (or electricity) in their cars and have a budget for fun and leisure. Markets go through cycles, regardless of politics. If you are going to be a market participant, set your expectations, your time horizons and your disciplines prudently. Patience rewards reasonable people.
Next, know that contrary to our feelings, our financial markets have done well with all combinations of parties in the presidency and congress. For example, the Pew Research Center conducted a survey asking Americans how they feel about the economy. Not surprisingly, Republicans feel better about the economy under a Republican president and Democrats feel stronger about the economy with a Democratic presidency. But the S&P 500 doesn’t care. During the Obama administration, the S&P averaged an annualized 16.3% positive return. Similarly, the S&P returned a healthy average of 16% per year during President Trump’s four years in office. 1 The key takeaway with this information is, stick to your disciplines regardless of your political preferences.
Finally, a look back over the past few decades shows that years of strong market returns happened when presidential approval ratings were between 35% and 50%, such as in the mid-1970’s, early 1980’s and 1990’s. It may be a surprise to know, but also reassuring to be reminded that strong returns can still be generated when less than half of the country approves of the president.
No doubt the United States Presidential election of 2024 is controversial with many issues to be concerned about. I fully advocate understanding what’s at stake and making an informed vote. Just know that when it comes to the long-term health of your finances, there is less to worry about than you may think with the interrelation of politics and your investments.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com SchulferAndAssociates.com , or louann.biz
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Source: Pew Research Center, J.P. Morgan Asset Management. Pew Research Center, “Republicans, Democrats Move Even Further Apart in Coronavirus Concerns.” Question: Thinking about the nation’s economy, how would you rate economic conditions in this country today… as excellent, good, only fair, or poor? The survey was last conducted in January 2024.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Investing includes risks, including fluctuating prices and loss of principal.
