Don’t Get Out of the Market Because of the Election
It's that time of the year - election season! The time of the year when the stock market goes haywire and some improbable crisis rears its ugly head, causing lots of grief and anxiety over everyone's retirement accounts. Wait, that was 2020. In fact, other than the will he or won't he drama around President Biden, things have been awfully quiet on the worry front. What in 2024 is going on?
At some point this fall, you can rest assured that the news cycle focus will shift to how the election outcome impacts the stock market. Speculation will run wild, predictions will be made, and anxieties will rise. However, history and economic theory tell us that there is nothing to worry about when it comes to the U.S. Presidential Election and your money.
The stock market is primarily driven by long-term economic fundamentals rather than short-term political events. Yes, who wins the election matters, but a lot of what is going to happen is already priced into the market. Entering 2024, the market expected Biden to win a close race but was completely content with a Trump victory. Sure enough, after Biden's first debate disaster, the stock market was relatively unchanged the following day as Trump became the favorite to win. Factors such as economic growth, corporate earnings, interest rates, and global conditions have always had a more significant impact on stock prices over the long haul than who wins an election. It's especially true in 2024 because we've already seen both Trump and Biden in office, and the markets did quite well under each of them.
Both major political parties generally support pro-growth economic policies, albeit with different approaches. Tax policies, regulations, and fiscal spending decisions are influenced by a range of factors beyond just the party in power, including economic conditions, international relations, and public sentiment. This mitigates extreme swings in policy that could disrupt market stability. Additionally, just because one party controls the White House does not mean they control all three branches of Congress. Simply put, there are some things that a President may want to do but ultimately cannot do. The market is ultimately driven by interest rates and corporate earnings - not blue and red.
The evidence has clearly shown that the markets can perform well irrespective of who is president. And whatever you do, don't sell all of your stocks right before the election. That's how you get out of the market and never get back in. I am not trying to say your vote doesn’t matter or that you shouldn’t vote, I am saying that you should let your principles and values govern how you vote, and let that be the only source of anxiety around the election because when it comes to the stock market you will be just fine regardless of who wins.
