Making Informed Investments During Election Season

There are major concerns for Americans with investments or mutual funds in volatility surrounding election results resulting in requests to reallocate, cash in or remove their investments.

Emmett Dupas, lead partner at Bienville Capital Group, said that clients become concerned during election seasons because they do not like change. “The market and people do not like change,” he said. “They fear that if their party loses the election, they will lose money.” This is one reason why people “cash in” on their investments three times more often in election years than in non-election years.

Dupas uses a questionnaire with his clients to establish their risk tolerance and understand the objectives of their investments. By doing this, advisors help their clients and investors remain focused on their long-term financial goals. “Long-term financial success is not based on whether the president that most closely aligns with your political viewpoints wins an election or not. In turn, your long-term financial goals should not change based on which party controls the White House,” said Dupas.

Mark Kingsbery Jr., a financial associate for Thrivent, is working his first election cycle and he said that leaving his crystal ball at home and staying up to date on the election and stock market have been crucial to his success. “My job is to focus on the facts of the market and economy and to make recommendations for my client’s best interest,” he said.

Presidential elections have not historically had long-term impacts on the market. Scott Schneider, an associate wealth management advisor with Northwestern Mutual Wealth Management Company said, “It’s important to look at the history: the market fares well regardless of the party or president elected. It’s important to make prudent long-term investment decisions, not market timing decisions.” Schneider added that it’s challenging to be objective when there are heavy emotions present, but it is necessary to create successful investment plans.

Election Market
Prior to election refers to 90 days before the election. During is an average of 30 days before and after. After is 90 days post election. All data from Morningstar Direct.

Ultimately, staying invested regardless of who holds the White House is imperative for success. Historically, the stock market has been able to predict the election outcomes for all but three elections since 1928 and has been correct for all elections since 1984 (Northwestern Mutual). In the ninety days preceding the presidential election, the incumbent party has historically won the election if the stock market is up and lost the election if the market is down.

For every investment decision, there is more to consider than elections, who to support or what the market is doing during an election season. According to these advisors, focusing on the business cycle over the election year, maintaining financial goals and speaking with an advisor are good tactics for finding financial success throughout elections.

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