Will the Presidential Election affect my portfolio?

Just when we get into a groove and feel in control, every 4-years a new Election cycle resuscitates itself and makes us re-evaluate everything.

Election Years (and their ad campaigns) have a pattern of reminding of just how little of the world we control.

Things like war, immigration, climate crises, social issues. And of course, the economy.

Strong economy → strong income → happy camper.

And when there’s genuine concern of things turning south, it’s completely natural to do a double-take on your life savings and make sure you’re most prepared.

Which leads to the ultimate question in an Election Year:

To start, I have no dog in this fight. 

But I have had this conversation many, many times. Sometimes it’s smooth, other times it completely spirals.

My downfall in the past? Show them the data of course!

Silly me.

It turns out that when someone asks that bold question, it’s loaded with even more underlying questions. They might be wondering:

Every point of uncertainty builds from now until Election Day. After that, our futures will feel much clearer.

Which means that the highest-impact money questions are:

1. How does the stock market perform right after Election Day when [insert Political Party] wins?

2. What should we do from now-until-then?

With those questions in mind: now… let’s look at some data.

Below is a mega-helpful chart which shows:

• a) the US stock market (S&P 500) price since 1926

• b) which President was in office along the way

For now, it’s important to focus on the years of transition to a new party.

In every scenario, no matter which Party took office, the stock market did not instantly fall off a cliff.

That said, in many different presidencies, there were major corrections (and economic crises) that happened along the way.

For instance, Texas-favorite, George W, had multiple rough patches in the stock market during his term. Over his 8 years, the US economy experienced the dot-com bubble of ‘01, followed by the unprecedented housing crisis of ‘08.

I can’t say that George W (R) caused those macro-events, just the same that I can’t say that Roosevelt (D) caused the Great Depression in 1929, the same year he took office. Those claims simply lack context, and don’t care whether the President had blue or red stripes on their jersey.

It’s more accurate to identify those macro-events as situations where the US economy over-heated, cooled off, and re-set.

In those periods leading up to recession or crises, people acted how they always do: they gamed the financial system to provide for their families, to the point where the circuit breaker hit capacity.

Like a toddler exploring the world, we learned a new boundary the hard way. Our government then built an imaginary fence to protect us against ourselves.

Rinse-and-repeat until we find the next boundary to cross.

Who is to blame for recession? Who is to praise during triumph?

The data and history-lesson above gives a very unsatisfying answer to the entire question at hand.

Even the Presidents whom we were certain would tank the economy and the stock market with it, ended up fine after the Election hype simmered down.

The takeaway is an unsatisfying lesson in being fair: We can’t blame any one-person or Party for recessions. Nor should we glorify anyone when the economy roars and the stock market hits all-time-highs.

What are the real risks, going into Election Day?

Notably though, leading up to Nov. 5, there does seem to be a lot noise & turbulence in the markets. Why?

People (investors) are extremely sensitive and nervous about their unknown future.

And we hate waiting in the dark.

It’s like when you have a doctor’s appointment you’re nervous about. You walk in and say “just give me the bad news already!”

Even if we get disappointing news, we feel better because we can move on.

Life up until Election Day is no different.

We’re currently 10-months away from knowing if we’re in for more-of-the-same, or if we’ll have a new Sheriff in town.

And in our current state where we are waiting around, we may want to do something (anything!) to help us feel in control of our livelihoods.

Should I do anything different with my portfolio?

The question still remains. What should you do?

The key to everyone’s financial success is finding the perfect balance between:

→ Safety

→ Staying disciplined with a proven, long-term strategy

For some, these periods could highlight that the extra risk isn’t worth it.

But for many others who are still building wealth and their long-term legacies, remaining disciplined - and strategic - will generally serve them well.

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