Presidential elections have always created an element of uncertainty for investors, and with November 3 less than 100 days away, this time is no different. The political polarization that’s intensified in recent years, coupled with the ongoing COVID-19 pandemic and an economy still feeling the effects of the resulting recession, are contributing to a heightened sense of uncertainty as Election Day approaches.
While there is no question that uncertainty can create short-term volatility for equity markets, we also believe it’s important for investors to keep a long-term perspective. As shown in the chart above, regardless who resides in the White House, the market has seen strong returns under both Democratic and Republican presidents. A $1,000 investment in the S&P 500 Index in 1936 would have been worth nearly $5 million today, but sitting on the sidelines when either party held power would have significantly limited that growth potential.
Of course, swings in the political climate and policy changes can affect the capital markets in the short term, but history tells us that their impact on long-term performance tends to be relatively insignificant, as corporate America has proven to be adept at navigating changes in the tax and regulatory environment over time. The bottom line is that while elections can sometimes generate angst for many, history suggests that investors would be wise to tune out the noise and stay invested.
Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.
Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.