Stock Market Activity After Elections: Should You Worry?
Elections can ignite emotions, not the least of which are about your investments. Learn why our financial consultants say to focus on your plan over politics.
Key Takeaways
Many investors are worried about the stock market and their investments after the 2024 presidential election.
Presidents and politics don't impact investing as much as people believe, so most concerns are probably unfounded.
Our financial advisors share what our clients are worried about in politics and what to focus on instead.
61% of investors say they are concerned about the 2024 presidential election and how it might impact their portfolios.1 Should they be? Financial consultants Trey Byrd and Duo Tran answer this and other questions they’ve heard from clients.
Why Investors Worry About Elections and Market Aftermath
People are already thinking about what will happen if their candidate wins the presidential election in November, or not. Some surveys suggest investors are particularly concerned this election year—but we heard that in 2020, too.
Should you lose sleep about who wins the 2024 election and how it will affect stock market performance and your investments? Our consultants say probably not.
“Portfolios are politically agnostic,” says Duo. “Our investment professionals are looking to take advantage of business cycles, not election cycles. Some may find it hard to believe, but presidents don’t affect the markets much.”
Is all the talk of elections and their impacts on the markets just hype? History would tell us, yes.
Since 1976, U.S. presidential election years have been good for investors.2 That's one key point Chief Investment Officer Rich Weiss makes when he discusses investing during a presidential election year. One exception was in 2008 when the stock market dropped because of the global financial crisis that occurred that year.
Emotions Drive Post-Election Fears About the Markets
Why do historical trends in election years not match current investor concerns? Trey believes it’s because elections have become so emotionally charged. "Emotions can affect investment choices, but we advise our clients not to let that happen," he explains. “An example is what happened when investors made emotional choices in 2020.”
Trey says many people made significant investment decisions that year. They switched to perceived safer investments because they were concerned about the upcoming election. Those fears probably felt worse in 2020 because of other global events, like the pandemic and resulting economic problems.
“There were some winners here and there from investing more conservatively in 2020,” he says. "But many people who made changes missed out on the market rebound that followed shortly after."
The ironic thing about those choices is that investors might have made them too early by four years. Trey suggests that now might be a better time for clients to think about more conservative investments. But not because of who will be president. Monetary policy resulting in higher interest rates and higher bond yields may make them more attractive.
Volatility Is One Concern, What About Policies?
In past presidential and midterm elections, investors have been concerned about volatile market returns after an election. But Duo and Trey say clients they’ve talked to may be more concerned about policies for taxes, inflation and the economy.
Some of Trey's clients worry about future economic growth and how a recession could affect their investments. If you’re concerned about an economic downturn, our consultants can help you prepare your portfolio for tough times based on your goals and risk tolerance. This includes considering factors like your timeline and your plans.
“If you have a managed account with our Private Client Group,” says Duo, “our investment professionals are making the asset allocation decisions based on their research, market knowledge, and the risk level of the portfolio. Knowing the professionals are in charge can make some investors feel more confident.”
If you're handling investments by yourself, it's important to diversify. Diversifying means spreading out investments across different asset types so they are not all affected in the same way by market changes. It's a strategy that can help manage risk in your portfolio.
Duo says another concern he’s heard from clients about the presidential election is how much government spending will happen in the future. And while high government debt could affect economic growth, who’s president probably won’t change the fact that debt has increased under most presidential administrations in the past.3
And what are the potential consequences if they're implemented? Tune into the replay of our recent webinar to get a nonpartisan view from acclaimed author and Stanford University historian Jennifer Burns.
Look Past Campaign Emotions and to Your Plan
Our consultants suggest sticking to an investment plan that aligns with your goals, regardless of whether it's an election year. For those particularly concerned about potential market changes or policy decisions, it never hurts to review your plan and ensure it still fits.
“At the end of the day, it’s about a client’s comfort level and goals,” says Duo. “We can help them find solutions for their needs now that also help them keep that long-term view of what they want to achieve.”
Authors
Trey Byrd, CFP®
Duo Tran, CFP®
Investors’ Election Year Worries Could be Overblown, Experts Say, Investopedia, December 2023.
Investing During a Presidential Election, American Century Investments and data from 1976-2023, Morningstar.
U.S. Debt by President: By Dollar and Percentage, The Balance, March 2023.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Diversification does not assure a profit nor does it protect against loss of principal.
Generally, as interest rates rise, the value of the bonds held in the fund will decline. The opposite is true when interest rates decline.
Private Client Group advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. This service is generally for clients with a minimum $50,000 investment. Call us to determine the level of service that is appropriate for you. The advisory service provides discretionary investment management for a fee. All investing involves risk.