Investors' Election Year Worries Could Be Overblown, Experts Say.
Key Takeaways
Over half (61%) of investors surveyed by Investopedia express concerns about the 2024 U.S. presidential election impacting their portfolios.
Historical Market Trends
Historical data indicates that markets tend to rise in presidential election years, with the S&P 500 recording positive returns in 83% of the 24 election years since 1928.
Expert Insights
Experts from J.P. Morgan, Fidelity Investments, New York Life Investments, and Comerica Wealth Management suggest that investors' election worries may be exaggerated.
Investors' Top Concerns
Since early November, investors have become increasingly worried about the potential impact of the 2024 U.S. presidential election on their portfolios. Over 61% of investors identify it as their primary concern, according to Investopedia’s latest reader survey.
Survey Findings
This concern is followed by worries about war in the Middle East, a potential recession, and inflation. Another survey by Nationwide reveals that nearly half (45%) of investors believe that presidential and congressional elections could have a greater impact on their portfolios than market performance.
Party Perspectives
Broken down along party lines, 68% of Republican investors anticipate a direct, immediate, and lasting impact from the presidential election, compared to 57% of Democrats.
Positive Market Performance in Election Years
While past performance doesn't guarantee future returns, an analysis of market performance in past election years offers encouragement to concerned investors.
Historical Data Insights
Historical data reveals that markets have tended to rise in presidential election years, with the S&P 500 recording positive returns in 20 of the 24 election years since 1928, or 83.3% of the time.
Average Returns
The average return for those election years was 11.58%, surpassing the S&P 500 average return of 9.81% for all years since 1928.
Expert Recommendations
“Elections may seem like a big deal at the moment, but historically have had little bearing on what path the economy and market ultimately take,” according to J.P. Morgan strategists. They advise that while volatility may increase leading into an election day, stocks tend to forge ahead as uncertainty fades.
Portfolio Guidance
Denise Chisholm, director of quantitative market strategy at Fidelity Investments, emphasizes that investors shouldn’t make significant portfolio changes because of an election. She notes the importance of being cautious about assuming that election-related angst predicts future returns.
Strategic Outlook
New York Life Investments strategists expect the 2024 election, like its predecessors, to include both political noise and real policy change. They encourage investors to stay above the noise, highlighting that it does not impact economic or market outcomes.
Fundamental Focus
“As sensational political headlines and escalating geopolitical tensions affect investor sentiment, a focus on the fundamentals of elevated interest rates, moderating inflation, and recovering profits should enable long-term, diversified portfolios to stay on course for their investment objectives,” said John Lynch, chief investment officer (CIO) at Comerica Wealth Management.