Staying Steady:
How Historical Data Can Ease Investment Fears in Election Years
Election years can bring uncertainty and anxiety, especially for investors. In this blog, we’ll explore how historical data can provide perspective and ease investment fears during the 2024 election season.
Major election years often bring heightened market volatility and investor anxiety. However, understanding historical market trends can provide reassurance and help you maintain a long-term perspective during these periods of uncertainty.
Historical Market Performance
If history repeats itself, then there’s an upside to that story.
Historical data shows the stock market has experienced volatility during election years but has also demonstrated resilience and growth over time. Analyzing past election years can help you see that market fluctuations are normal and often temporary.
Market Trends During Election Years
Market trends during election years typically show short-term volatility around key events, such as debates, primaries, and the election itself. However, these fluctuations often have little impact on long-term market performance. Historical data indicates that markets generally stabilize and continue their upward trajectory post-election. Continue to remind yourself of this fact as you walk through the next few months.
Impact of Political Parties
Here’s another interesting fact to note. While people may think things are better when “their party holds office,” research indicates that the market’s long-term performance is not significantly affected by which political party is in power. Both Republican and Democratic administrations have overseen periods of economic growth and market gains. It is important to focus on broader economic factors rather than short-term political changes.
The Importance of Staying Invested
As you’ve done in the past, think big picture and long-term. One of the key takeaways from historical data is the importance of staying invested. Trying to time the market by pulling out investments during election uncertainty can lead to missed opportunities. Long-term investors who stay the course typically see positive returns over time.
Focus on Fundamentals
Another tip to help you weather this election season with less distraction is to watch your focus. Instead of reacting to political noise, focus on the fundamentals of your investment strategy. Diversification, asset allocation, and regular portfolio reviews are essential components of a sound investment plan. These principles remain effective regardless of political events.
I’ve shared a few facts regarding historical data which may reassure you. But sometimes, action is more comforting. Let’s discuss a few specific strategies to help you stay calm and make informed decisions during this election year.
Strategies To Help You Make Informed Decisions During This Election Year.
#1 Review and Reaffirm Your Investment Goals
Start by reviewing and reaffirming your investment goals. Understanding your long-term objectives can help you stay focused and avoid making impulsive decisions based on short-term market movements.
#2 Diversify Your Portfolio
Diversify your portfolio to spread risk across different asset classes and sectors. A well-diversified portfolio can help mitigate the impact of market volatility and provide more stable returns over time.
#3 Avoid Emotional Investing
Avoid making investment decisions based on emotions or political biases. Stay disciplined and adhere to your investment strategy, keeping in mind that short-term volatility is a normal part of the market cycle.
#4 Seek Professional Guidance
Seek guidance from a financial advisor to help you navigate market uncertainties. A professional can provide objective advice, help you stay on track with your financial goals, and offer strategies to manage risk during volatile periods.
#5 Stay Informed, But Don’t Overreact
Lastly, stay informed about market conditions and economic indicators but avoid overreacting to daily news and political events. Focus on credible sources of information and maintain a long-term perspective on your investments.
Yes, election years can be challenging for investors, but historical data shows that markets tend to recover and grow over time. By staying invested, focusing on fundamentals, and following a disciplined investment strategy, you can navigate election-related market volatility with confidence.
Thank you for reading our blog. Remember, we believe you can have a flexible life plan to achieve more of what you love: more financial confidence, more for your family, more freedom, and more choices.
Chris Zeches is a Certified Financial Planner® and Managing Partner at Zeches Wealth Management. Zeches Wealth Management has one singular focus: To use our financial planning and tax expertise to help multi-generational families and business owners achieve more of what they love.
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