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Clarifying Misconceptions: The Real Impact of Elections on Markets | AWM Insights #189
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There are many perceived effects of presidential elections on investment strategies and markets, but the data clearly shows that there is a misconception here. Over the past 100 years, there have only been 4 election years that have had negative returns, all of which were not influenced by presidential elections. Those 4 negative years were 1932 (Great Depression), 1940 (World War II Ramping Up), 2000 (Dot com bubble), and 2008 (Great Recession).
Counterintuitively, the S&P 500 typically sees an average return of 11.5% during election years, which is slightly above the average return in all years (10.3%). Instead of being a critical component, elections are merely one of many factors at play when it comes to market performance.
The importance of maintaining a long-term investment strategy and preparing for potential market fluctuations underscores the need for investors to distinguish between informed decision-making and impulsive reactions to political news.
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Episode Highlights
- 00:00 Intro
- 01:21 Data on the S&P 500 returns during election years, highlighting the minor impact of elections on market performance
- 02:53 The principle of voting in the ballot box, not with your portfolio
- 03:51 Volatility is elevated leading up to elections
- 04:44 Text us!
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