I’ve had several people ask me recently about presidential elections and their effect on the markets. Great question! Let’s take a look…
There is a tremendous amount of information from academic sources on the subject, and after having looked at the data I have some insight I would like to share.
I asked questions such as:
Do presidential elections make the markets go up? Down?
Is it better if a Republican is elected, as opposed to a Democratic administration?
Do markets generally go up or down before an election?
Do markets generally go up or down right after an election?
Going all the way back to George Washington, the trend is remarkably clear. In fact, presidential elections have had the same effect on the markets for hundreds of years.
So, in the end, what is the answer? What kind of effect does an election year have on your investments?
None.
Literally. There is no correlation between presidential elections and the stock market. Absolutely none. There might be some elevated volatility, but from a long-term perspective, no one can find any positive or negative connection between presidential elections and the stock market.
Which takes me back to the mantra I want all of you to repeat, “Nobody knows when the markets are going to go up or down, but long-term they have always gone up.”
By the way, the Dow Jones Industrial Average in January of 1885 was 30 points. Yesterday the Dow Jones closed at 18,553 points.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.
The value of fixed-income securities may be affected by changing interest rates and changes in credit ratings of the securities.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Indexes are unmanaged portfolios and individuals cannot invest directly in an index. Actual results will vary.
This communication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any securities or product, and does not constitute legal or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.