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Key Takeaways
- Financial planners advise against making knee-jerk investment moves as the outcome of the presidential election becomes clear.
- Experts note that volatility is par for the course during an election year.
- However, historically, most election years have had positive average annual stock market returns.
Uncertainty around the outcome of the U.S. presidential election has been weighing on investors. As the election process draws to a close, financial advisors recommend that investors stick with their long-term plans despite who’s elected or what happens in the markets in the coming days.
“The real risk isn’t the election–it’s our reaction to it. The average investor’s worst enemy isn’t policy changes or market swings; it’s their own behavior when scared or excited,” said Jason Siperstein, President and Wealth Advisor at Eliot Rose.
Prepare For Volatility—Even If You Expect Positive Returns
Experts suggest not making drastic portfolio changes based on expectations of what will occur in the election and the economy.
“I would urge people to be hands off with respect to changing up their portfolio ingredients based on their expectations of what might happen,” said Christine Benz, director of personal finance and retirement planning for Morningstar, in a recent interview.
Research indicates that despite volatility, the average annual stock market returns have been positive in the majority of election years since 1927.
“I expect volatility in the coming weeks regardless of who wins or loses, but we shouldn’t let it change how we invest,” wrote William Michael Lofley, a CFP at HBKS advisors, in an email to Investopedia. “Historically, it doesn’t matter who controls the White House—the stock market finds a way. It is important to stay invested.”
Megan Gorman, founder and managing partner of Chequers Financial Management, notes that there are some election results that could make market volatility less likely.
“Markets tend to prefer when we have a president of one party and a Congress of another party. And that may seem odd because, from a more pragmatic standpoint, it sounds like nothing will get done,” Gorman said in a September interview. “But it’s about certainty. If there is this idea that nothing can get done, we’re pretty certain of the outcomes.”