Many of our clients have expressed concern over the presidential election and the impact it may have on their portfolio and therefore their money. With the extremism tied to this election and the media’s opportunistic use of it, it can be difficult for investors to maintain perspective and focus on what is within their control. In times of uncertainty, investors must make sure they don’t let biases and emotions override what evidence has proven to be true.
The stock market’s current price is the aggregate of the expectations of all market participants. Plainly stated, the market’s current position is based on peoples’ beliefs about the future. These beliefs include the results and impact of the presidential election. Surprises or unanticipated results may move the market, but they wouldn’t be surprises if the results were known ahead of time, so trying to benefit from them is likely to be unsustainable. Even if you did produce a positive outcome, chances are likely it would be attributable to luck.
With all this back and forth over which party is better for the economy, let’s look at what history tells us. As you can see in the chart below (recently included in an article by DFA), the market has substantially increased regardless of who was in office.
Investors must remember investing is a long-term endeavor. Let time work in your favor, and remember to focus on the things you can control like fees, taxes, your asset allocation, and your behavior.