Americans everywhere have been using a variety of words to describe this election cycle, but “drama-free” certainly hasn’t been one of them. Between the candidates’ one-upsmanship and non-stop media coverage, it’s easy to get caught up in the hype and worry about how the result could impact you – including your investments. Now, more than ever, however, it’s important to keep a clear head, maintain a long-term focus and remember that history has shown that the party in control of the White House usually has a negligible long-term impact on the markets.

To begin, baseline data indicates that markets in general perform well in election years.

In fact, in presidential election years since 1945, the S&P 500 gained an average of 5.9% in price and rose 71%. In addition, dating back to 1960, we’ve only seen two election years where the S&P 500 was negative – in the bursting of the tech bubble in 2000 and the depths of the global financial crisis in 2008 – and these fall-offs likely had more to do with the bear markets that were already in place than the elections.[1] So history has shown that elections have had less of an impact on markets than other external events.

While you may feel a desire to get out of the stock market until the election blows over, additional studies also show that staying invested for the long-term can help you achieve your investment goals. Oppenheimer Funds recently put together a comparison of three investments in the Dow Jones Industrial Average covering the span of 1945 to 2015. If you were to have stayed invested regardless of the political party in the White House, the end result was a value more than four times greater than what you’d have if you only invested when either Democrats or Republicans sat in the Oval Office.[2]

This election cycle has been a wild ride and it’s likely to continue even after all the votes are counted.

Whatever the outcome may be, it’s important to keep your emotions from getting the best of you – because when that happens, you’re more likely to make regrettable choices. Keep your focus on the long term and remember that the financial world will continue to march on regardless of what’s happening in Washington, D.C. – and that while this year may not mirror exactly what’s happened in the past, for the majority of investors with a long-term time horizon, the party in control of the White House is not likely to make or break your portfolio long-term.

 

[1] Stovall, S. (2016, 9 May). Election Uncertainty: Performances. S&P Global Market. Intelligence. Retrieved November 7, 2016, from http://eu.spindices.com/documents/commentary/20160509-sector-watch-election-uncertainty-performance.pdf 

[2] Blease, P. and Levitt, B. (2016, 29 February). Investors’ Clear Election Choice: Stay Buckled In. Oppenheimer Funds. Retrieved November 7, 2016, from https://www.oppenheimerfunds.com/investors/article/investors-clear-election-choice-stay-buckled-in 

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