What We're Thinking: Markets and Elections

  

Decades ago, Mario Cuomo summed up elections perfectly: “You campaign in poetry and govern in prose.” Keep that in mind as we hear a lot of poetry in the next few months.

People ask, “What will happen if so and so is elected?” Or more bluntly, they'll assert, “If that person is elected, terrible things will happen.”

 

And you might be wondering if there's something you should do with your investments.

Since our analytic bias is rooted in evidence, we took a look at the six seven elections that have happened in this century. We found that over the one-year period before and after a Presidential election, markets performed in line with long-term averages. Here's the data:

                             All Stock Portfolios   Diversified Portfolios         Background

1999-2001                      -15%                             -  2%                  Dot-com Crash. 9-11. Bush elected.
2003-2005                     +24%                            +20%                  Bush re-elected.
2007-2009                      -21%                             -12%                  Great Financial Collapse. Obama elected.
2011-2013                     +52%                            +27%                  Obama re-elected.
2015-2017                     +32%                            +20%                  Trump elected.

2019-2021                     +50%                            +24%                  Covid. Inflation. Biden elected.

2023-2025                     +53%                            +37%                  Trump vs Biden Harris. Tariffs. Mag7.

Average                         +25%                            +16%                  Up 71% of the time.

A recent BlackRock study revealed that election year returns average 7.3%. All other years averaged 7.5%. And another version showed no meaningful differences in election year returns versus other years.

Just keep moving folks. Nothing to see here. “Elections have less impact on the markets than some would like you think. Ultimately, it's the long wave of economic fundamentals that drive markets beyond any one election or any one party.”

Our purpose is to give you actionable, evidence-based information, so you can confidently get on with your life. Financial plans are designed to sustain you for 20, 30, maybe 40 years. One election is not going to change that. Having a written financial policy statement, sticking with your asset allocation, having a comfortable cash reserve, staying diversified, and rebalancing as necessary will carry the day.

Enjoy the poetry.

Jim Cosgrove, CFP, Plano, TX             jim.cosgrove@verizon.net      972-489-0262
Jim Cosgrove, Partner, San Jose, CA   jimcos42@gmail.com             408-674-6315