The upcoming presidential election between President Joe Biden and former President Donald Trump has sparked feelings of anxiety among investors. According to a survey conducted by investment company Betterment, more than half of investors (57%) expressed nervousness about the election, with 40% expecting to make changes to their investments based on the outcome. The survey, which polled 1,200 individual investors across different age groups, revealed that many investors are worried about how the election results could impact their portfolios.
While investors may be feeling anxious about the election, financial experts advise against making investment decisions based on political factors. They emphasize that market performance is driven by economic fundamentals rather than political outcomes. Regardless of who wins the election, experts recommend maintaining a diversified portfolio and focusing on long-term saving goals rather than reacting to short-term political events.
Despite the apprehension surrounding the election, financial planner Cathy Curtis notes that the stock market has remained stable throughout the year. Major indexes like the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average have continued to reach record highs in 2024, indicating confidence in the overall market. Curtis encourages investors to remain calm and avoid making impulsive decisions based on political uncertainties.
Dan Egan, vice president of behavioral finance and investing at Betterment, observes a trend of investors incorporating their political beliefs into their investment strategies. Some investors believe that the outcome of the election will have a significant impact on the economy and stock market, leading them to adjust their portfolios accordingly. However, historical data shows that presidential elections have had minimal impact on stock market performance, with returns remaining relatively consistent regardless of the election results.
An analysis by J.P. Morgan Private Bank dating back to 1928 reveals that the S&P 500 has returned an average of 7.5% in presidential election years, compared to 8% in non-election years. This data suggests that the stock market tends to perform consistently regardless of who is in office. Egan emphasizes the importance of understanding the separation of powers and the role of institutions like the Federal Reserve in maintaining economic stability.
In response to election-related anxiety, some investors are considering increasing their holdings in savings accounts. While having a cash reserve can be a wise decision, financial experts advise against keeping too much money on the sidelines. With high interest rates on savings accounts and low-risk investments, investors can strike a balance between liquidity and market exposure to maximize their returns in uncertain times.
As the presidential election approaches, investors should focus on maintaining a disciplined investment strategy and avoiding knee-jerk reactions to political events. While it is natural to feel anxious about the future, staying informed and sticking to a well-thought-out financial plan is key to navigating market volatility. By understanding historical trends and focusing on long-term goals, investors can weather the uncertainty of the election cycle and emerge stronger in the end.