As the U.S. election on November 5th approaches, uncertainty about what lies ahead is on the rise—particularly regarding how global markets might respond. While media coverage will likely emphasize potential volatility, it’s essential for investors to stay grounded and maintain a thoughtful outlook. In efforts to help you maintain perspective during this period, we have outlined a few key principles to keep in mind.
Election Results and the Market: There is No Predictable Correlation
Investors often look for a connection between election outcomes and market performance. However, nearly a century of data shows that, regardless of who holds office, stocks have generally trended upward. While U.S. presidents can influence market returns, many other factors—such as foreign policy decisions, interest rate movements, energy prices, and technological advancements—also drive market behavior.
Markets Are Forward-Looking
Markets are constantly processing new information, including who might win the presidency, which party could control Congress, what policies may emerge, and how those policies might impact economic growth and future corporate earnings. As a result, much of the election’s influence on markets is already priced in. Trying to outguess the market’s ability to absorb this information is a losing proposition.
Remember What You Are Investing In
As shareholders, it’s crucial to remember that you are investing in real companies that provide essential goods and services. Regardless of political changes, businesses will adapt, continue to meet customer needs, and pursue growth and profits for their shareholders.
Managing Political Risk
Political risk is one of the many risks that you assume when you choose to invest. As you think about political risk, it is helpful to keep two things in mind. First, investors can reasonably expect to be compensated for bearing risk, including political risk, in the form of higher expected returns. Second, the most effective way to manage this risk is by treating it like any other—through diversification.
Staying the Course
During periods of political uncertainty, it’s important to tune out short-term noise and remain focused on your long-term goals. Historically, markets have continued to grow over time, regardless of shifts in political leadership. While volatility may arise, your financial plan should be built to withstand these fluctuations—ensuring you stay on track toward your objectives.