Stock Market Activity After Elections: Should You Worry?

Key Takeaways

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

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.”