Under normal circumstances, election years always provide some added volatility to overall stock market performance. Throw in this years COVID pandemic, and predictably so, the market has been rockin’ and rollin’ leading up to this election. But what can you, as the investor, do in these unpredictable times? Looking back on history, we can understand that the up and down cycle is due largely to uncertainty. The market does not like uncertainty. With that said, no one can predict the future, so tread carefully.
“Out on a Limb” Predictions
Take all “out on the limb” predictions about how the market will react to either candidate winning office. I’m sure many of you have been hearing the so-called TV talking head experts proclaim that “If Biden wins, this is going to happen” or “If Trump gets re-elected, this is going to happen”. No one knows exactly how the market will react in either situations. History has shown both positive and negative performance following re-election of the incumbent or election of the challenger. The main thing to keep in mind is to not panic. The chart below (courtesy of article published in Forbes magazine on 8/18/2020 authored by Kristin McKenna), details only two instances in the last 100 years where the market tanked following an election. (Coolidge & Hoover). Since the infamous “Stock Market Crash” on the early 1930’s, overall market performance has been on the rise. No matter who wins on 11/3/2020, the market will be resilient.
How to Manage Your Money
Understand historical performance – Should Trump win re-election, history has shown a favorable eye for the incumbent getting re-elected in the short-term. This has little to do with the actual candidate or more to do with “change”. The opposite has held true should Biden win. The Presidents bring about new policies which can take time for the market to adjust.
Take the “News” with a grain of salt
The news media, which seems to do nothing but further polarize the population these days, will be at a fever pitch the days leading up to the election, on election day, and until the election is finalized. Don’t over-react to any one piece of information. One of the key fundamentals on investing, is to not get emotional. No matter who wins, things will level off. Don’t go cashing out your 401k and buying gold or vice-versa.
Remember Your Investment Strategy
One of the easiest methods to avoid making an emotional investment decision is to revisit your investment strategy. Focusing on your time horizon and risk tolerance are always a good starting point if your feeling anxious about market conditions. Don’t fixate on things out of your inner-circle of control.
Take a Step Back
Finally, and it’s the common theme here, take a step back. No need to rush into a decision that might be damaging to your long-range goals. Don’t let all the “what-if’s” swirling around in your head lead you to make a change that under “normal” circumstances, you would not make the same choice. Patience is the key. As the chart displayed above, the market will fluctuate, but the overall performance continues to be positive.
Should you have the need for an individualized, complimentary review of your current investment portfolio, please contact me directly at louis@louisromero.com. We can set an appointment to review your current investment mix to ensure you are on track to achieve your investment goals.