Preparing Your Portfolio for the 2024 Election

08/07/24

The Preparation

We are less than three months away from the 2024 Presidential Election. I hear concern every four years about how the upcoming election will affect the stock market and investment portfolios, so let’s tackle that topic.

I have been in plenty of meetings where a client says “If [insert Republican candidate here] wins the election, the market is going to tank. Let’s change my portfolio.”

I have also been in plenty of meetings where a client says “If [insert Democratic candidate here] wins the election, the market is going to tank. Let’s change my portfolio.”

I have yet to see someone benefit from trying to time the market based on an election cycle, so my answer is the same for both scenarios: “I understand your concern, but don’t let a presidential election affect your investment and retirement goals.”

It is true that the market can be volatile during an election year, but I do keep this in mind while building a portfolio. If my client prefers less volatility in his/her portfolio and is willing to accept a lower return, I allocate the account in that way. On the other hand, if my client can handle volatility for a higher return, I allocate the account in that way instead.

We CANNOT control all of the different variables that can affect the market, including the results of an election. We CAN control how we allocate our investments, which is why we strategize with the potential of volatility in mind.

What Does History Tell Us?

Let’s put aside the passion for our political parties and strictly look at history. Since 1945, there have been seven Republican presidents and seven Democratic presidents.

The S&P 500, one of the leading indicators of how the overall American stock market performs, has averaged 10.75% per year in the years that a majority of the year was led by a Republican president. It has averaged 14.72% per year in the years that a majority of the year was led by a Democratic president. Republican data has the advantage in recent history, and Democratic data has the advantage overall. Each president has been in office under different circumstances, but it is great news for all of our portfolios that both parties have had success with the market.

Remember, it is okay to not like a candidate but still appreciate that the economy didn’t collapse under their leadership.

Proof of the Data

See this chart I put together HERE for a breakdown of the S&P 500 performance under each president since 1945.

See this graph I put together HERE for a chart of the average S&P 500 performance under each president since 1945.

The Takeaway

No matter your political affiliation, do not let your emotions or disdain for a political party hinder your ability to make smart investment decisions. Do not confuse passion for financial knowledge. Resist the urge to make a financial decision out of fear rather than data.

* Please talk with me about your specific situation. I never charge for meetings or advice; I only get paid directly from accounts that I manage.