Red or Blue – Do Politics Matter for Markets?
By: Raj Chokshi
Election season is here! If you’re “lucky” enough to live in a swing state, you are about to be inundated with ads, calls, texts etc. These messages aim to stir emotions about a candidate or policy and sway your vote. However, do they truly affect investment markets? Both candidates often paint a picture of dire consequences if the opposing party wins. When in reality—the impact on your financial well-being is likely minimal, if at all.
This chart below shows that regardless of which political party is in control, the stock market has exhibited long-term growth. The chart tracks the growth of a hypothetical $10,000 investment in the S&P 500 index made at the start of each election year since 1936, then projected forward 10 years. The average annualized return, regardless of the presidential administration, was found to be statistically insignificant.
This analysis also indicates that investors should not base their investment strategies on the political party in power. The stock market’s trajectory is shaped by a multitude of factors such as corporate earnings, interest rates, and economic expansion. These factors are more important than politics in determining the long-term performance of the stock market.
Some investors often say they will wait for the elections to be over to invest for the long term. Looking at returns during election years versus the years after the election are likely to be negligible. As you can see from the chart below, from 1928 to the 2020 election, there is only a small difference in returns, and out of the twenty-six election years, only two were negative.
Market volatility often stems from political uncertainty, particularly regarding the potential policies of each candidate. However, in this particular election cycle, regardless of personal preferences towards the candidates, businesses and markets have already assimilated their proposed policies. Consequently, from a business perspective, the investment markets are unlikely to react dramatically to the election of either candidate.
The best thing to do is invest as if the election weren’t a factor and maintain focus on your long-term goals. As we always say, the only bad question is the one that isn’t asked. Don’t hesitate to contact your Bluerock Wealth advisor with any questions you may have. They’re here to help you navigate through any uncertainties.
Bluerock Wealth Management is registered with HighTower Advisors, LLC, an SEC registered investment adviser and/or Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through HighTower Advisors, LLC. Securities are offered through HighTower Securities, LLC.
This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.
All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Bluerock Wealth Management, HighTower Advisors, LLC nor any of its affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Bluerock Wealth Management and HighTower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of HighTower Advisors, LLC, or any of its affiliates.
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Bluerock Wealth Management is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.
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