How Will The US Presidential Election Impact The Stock Market? (EP.160)

0:28We all need to make smart decisions with our money. grabs investors' attention every four years. You guessed it, the presidential election. The potential impact on the economy, policy, and markets often leads to increased anxiety and speculation. However, history shows that election outcomes have a minimal impact for long-term investors. I've included a series of charts from a variety of sources in the show notes at thelongterminvestor.com. And if you haven't ever before visited thelongterminvestor.com, this is the perfect opportunity because there are eight charts looking at a variety of performance measures relative to the political regimes and election cycles.

1:13As you'll quickly realize from the data in the charts, the historical facts are clear. The stock market has advanced regardless of which party is in the White House. And let's remember what is happening when you invest. When you invest, you're providing capital to companies who are trying to earn money regardless of what party controls the White House or Congress. And there's undoubtedly going to be short-term market moves leading up to and following the elections. And every election year, I see the uncertainty surrounding the elections cause investors to make decisions that are full of emotion and lacking in relevant data.

1:58Even worse, there will unfortunately be many investors who are even more susceptible to this behavior when the candidate they voted for doesn't win. This does not have to be you. As the election dominates headlines over the next several months, try your best to step back and think about the bigger picture. Think about the reason you invest in the first place. You're investing to grow your wealth at a rate greater than inflation without taking undue risk. Bringing politics into your portfolio results in the type of market timing and security selection mistakes that is conclusively bad for your long-term returns.

2:43Said another way, the risk of being wrong with these types of trades is undue risk. Meanwhile, the uncertainty that you may be feeling now or may feel in the future because of the election or really any other situation in the world is simply the cost of higher expected returns that stocks offer versus alternatives like cash or bonds. Times like these are precisely when the importance of having a long-term financial in place is highlighted. When you have a long-term plan in place that considers the uncertainties around these sorts of events and incorporates periods of poor market return similar to the frequency and magnitude with which we've seen in the past, it eliminates the need to react to the latest news or headlines.

3:32Elections are high-stake events that capture national attention, and so it's easy to get caught up in the drama and uncertainty. However, as long-term investors, it's crucial to look beyond the immediate noise. So again, go visit thelongterminvestor.com, check out all the data and charts I have there, and if you found this discussion helpful, please consider leaving a review and sharing it with fellow investors. As always, thanks for listening and until next time to Long-Term Investing.

4:29This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of PlanCorp and BrightPlan may maintain positions in the securities discussed in this podcast.