Election night can be tense. The anticipation of watching results can morph into relief or concern as outcomes materialize.
Whether your preferred candidates win or lose (and we drafted this article before tonight, so we believe these insights apply regardless of the results), one of the most important things you can do on election night is remember what you know to be true — about the government, about the market, about investing — and avoid making emotional decisions.
We asked our advisors to share their insights and advice on how to respond to election results. Here are six things investors need to know.
1. Remember what history has to say
“I like to remind clients that non-election year market returns are around 8%. Election year markets are around 7.5%.”¹ – Tanner Stepp, Wealth Manager, Lafayette
“History tells us that market trends and returns are not based on which political party is sitting in office. Prudent, emotionless investing is important. Cash will not give the same returns.” – Laura Morton, Financial Advisor, Auburn
“The market historically does not care whether a Republican or a Democrat wins. Long-term historical results are very similar either way. In fact, the market loves gridlock. So, if we have a divided government, so much the better, according to history.” – Brian Davis, Wealth Manager, Waco
Whether you believe history repeats itself or not, it can certainly help us manage our expectations. While election results are significant to many Americans, historically, the market is not overly concerned.
Like you, our team has weathered financial storms (think 2008 financial crisis and 2020 pandemic), and we don’t see the outcomes of this election as something to fear. Instead, we trust what history has to say.
2. Remember how our government works
“Remember that proposed tax changes are ideas, not reality, and that the government has a checks and balance process, which means that Congress would have to approve any tax legislation. Policy change takes time.” – Laura Morton, Financial Advisor, Auburn
“One way of looking at the lack of direct impact the executive branch solely has on market pricing is that markets historically tend to perform well during periods of political gridlock, where different parties control the White House and Congress. The reasoning is that no single party will have full control, so it’s harder for major market-disrupting legislation to pass, providing a sense of policy planning stability.” – Chris Bredeson, Wealth Advisor, Plano
Another thing to remember is how the government tends to work. As you know, the American government has built-in checks and balances to keep power contained. This means change can be slow, and political gridlock is possible.
While frustrating for forward momentum, gridlock can benefit the market and serves as a reminder that newly elected officials often can’t make massive, long-term changes right away.
3. Remember how the market tends to work
“Every day, the market reacts millions of times to thousands of data points, some more impactful than others. If it is possible to predict the next four years of market returns based solely on election results, half of us would have gotten very rich a LONG time ago.” – Adam Lisowsky, Wealth Manager, Cincinnati
“You may have heard the saying, ‘Markets are NOT red or blue; they are green.’ Markets rise over time, regardless of the president in office. Uncertainty, not who’s elected for president, causes market volatility. There are a million things the market cares about — such as earnings growth and economic growth — before it cares about the politics of the day.” – Adam Spence, Wealth Manager, Plano
“While presidential policies can create short-term market noise, the real driver of a company’s stock price is its leadership team’s ability to innovate, manage profits, and execute long-term strategy — factors that ultimately have far more impact on a company’s success than any administration in office.” – Chris Bredeson, Wealth Advisor, Plano
If there’s one thing you know after being invested for any length of time, it’s that the market reacts.
- Economic data is released — the market reacts.
- Tension comes to a head across the ocean — the market reacts.
- A new president is elected — the market reacts.
When the market reacts, you don’t need to be alarmed. That’s how the market tends to work.
The results of this election are just one thing the market might respond to, but your returns do not hinge entirely on who is in office. The market keeps an eye on many factors and is more concerned about uncertainty in general than specific events or outcomes.
4. Remember what you can and can’t control
“Hindsight is always 20/20. The best approach to financial planning is to control what you can control and focus on what you can do long term to achieve your personal goals.” – Chad Baxter, Advanced Planning Advisor, Cincinnati
“An election is like any other “no control” event that brings uncertainty. So, we have to focus on what we can control by following the principles of planning and investing. Focus on (1) how much you save and spend and (2) how much you choose to participate in the equity markets. These are decisions with long-term ramifications. In the short term, (1) make sure you always have a cash reserve fund of at least six months of expenses and (2) that you allocate resources into low-volatility investments to cover major purchases/expenses that you anticipate coming in the next 12-24 months.” – Chris Lipper, Wealth Manager, Plano
“Whether election results come in the way you hope or not, the sun will come up the next day, and life will go on as we know it. The market will open up at 9:30 Eastern and close down at 4:00 Eastern, and it will repeat that the next day, the day after that, and the day after that.” – Brian Davis, Wealth Manager, Waco
We constantly remind clients that they have to pull their focus away from what they have less or no control over – market returns, policy regarding taxation and geopolitical events, election results – and focus instead on what they can control – market participation and saving versus spending decisions.
The rhythms of the market will march on no matter what happens on election night. The most you can and should do is make sure your financial foundations are secure:
- Do you save enough? Do you have an emergency fund?
- Do you have enough invested in the market (and are you keeping it there, even during volatility)?
- Are you prepared for upcoming expenses?
Don’t fail on the controllable factors of your financial plan because you’re too concerned about the uncontrollable.
5. Remember to stay invested
“There may be a sudden and reactionary dip or surge in the markets the day following an election, but these jolts are short term and will not impact your long-term investment plan. Get a good night’s sleep, and give us a call the next day if you have any doubts.” – Adam Lisowsky, Wealth Manager, Cincinnati
“Successful long-term investing is all about a person’s time in the market, not the timing of the market. Be disciplined, save, and invest over a long period of time, and you will be in great shape for the long term.” – Brian Davis, Wealth Manager, Waco
“Volatility around elections can bring great investment opportunities. Should that happen, our portfolio management team stands ready to capitalize and is well positioned to turn volatility into opportunity.” – Dennis Kehoe, Wealth Manager, Portage
Evidence suggests that exiting the market can cause you to miss out on returns.
In our Investment Policy Committee’s report on “Time in the Market,” they note that:
“Missing the best-performing days in the market over the past 25 years resulted in a weaker annualized return compared to staying invested throughout the entire period. For example, an investor who remained fully invested in the S&P 500 over the past 25 years would have realized an annualized return of 7.54%, while an investor who missed the top 10 days would have realized an annualized return of only 4.24%…History shows that investors who acknowledge the fact that downturns are an inevitable part of investing, look beyond short-term volatility, and remain invested have a greater chance of achieving long-term success.”
Think of all the work you’ve put in to save, invest, and collaborate with your advisor to build and live out your plan. Do not let one election cause you to make a decision that could jeopardize that hard work.
Trust that volatility is normal (remember, the market reacts!), and don’t make emotional decisions. Stay invested.
6. Remember to talk to your advisor
“Stay the course. Turn the TV off. Do not believe everything you hear. Please call me when you feel nervous about the market and your life savings. Once we review returns, balances, and your financial plan, you will feel comfortable and confident again. The key is to communicate with your advisor and keep emotions out of investing.” – Laura Morton, Financial Advisor, Auburn
“Our focus remains steadfast on the long-term growth potential of clients’ investments, independent of the noise that often accompanies Wall Street and political shifts. We are here to monitor the evolving capital markets and proactively adjust our approach, ensuring clients’ financial goals remain on track.” – Chris Bredeson, Wealth Advisor, Plano
“The worst investment decisions get made when emotions are at their highest. My job as an advisor is to provide clients with rational expertise during those moments.” – Adam Lisowsky, Wealth Manager, Cincinnati
We want you to be informed, but we don’t want your pursuit of information to derail you from your long-term goals. Return to the objective sources that have your best interest at heart.
If you have concerns, express them to an expert who can help you know if there is anything you need to do. Your financial advisor is here for you regardless of who wins.
We always watch how the market reacts and how that impacts clients’ plans and portfolios. We’ll make minor shifts when needed and keep you on track to succeed.
If you have questions about election night results, reach out to an advisor using the form below.
Contributing Sources:
- Bloomberg Finance L.P. Data as of December 31, 2023.