Election 2020 - A Dose of Patience

The upcoming election is prompting some people to reconsider their investment strategy. But if history is any guide, patience may be the answer.

For the past 12 presidential elections, the Standard & Poor’s 500 index has notched a 4% gain, on average, in the 90 days after the election. (1) 

Of course, past performance does not guarantee results. And there have been some notable exceptions to the trend. In 2008, for example, the S&P 500 dropped more than 10% in the three months following the election as the global financial crisis gripped the markets. And in 2000, the S&P 500 fell 4.1% from election day until December 12, when the Supreme Court ruled on the election between George Bush and Al Gore. (1) 

Investing involves risks, and your goals, time horizon, and risk tolerance should be what drives any changes to your portfolio strategy. If you’re concerned that the upcoming election may change one of these critical factors, perhaps it's time to review your investment approach.

Regardless of who sits in the white house – business marches to it’s own drummer. Throughout history it has been better to be invested in the optimism of what is going to be created in 5, 10 and 20 years, and not who the president is going to be for the next 4.

In the news and in our social circles we are constantly being told how much we should care about the impact elections are going to have on business . The impact will be there to some extent - sentiment may shift, tax policy may shift, trade policy may shift. But in the long run US ingenuity, entrepreneurship, and the sheer force of creative people getting up and going to work everyday, that’s what’s going to push us forward.

Now is a good time to reflect on a quote from legendary investor Warren Buffett, who reminds us, “The stock market is a device for transferring money from the impatient to the patient.”

Citations

1. HartfordFunds, 2020