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As the 2024 US presidential election draws near, many investors are concerned about how the outcome will affect their investments. However, history has shown that the impact of presidential elections on the stock market can be a “mixed bag.”
According to research conducted by Morningstar, the S&P 500’s performance starting from November 1 in the past 25 presidential elections has varied. While forward one-year returns were positive for the majority of elections, including both Democrats and Republicans, the long-term performance showed more consistency with positive returns for Democrats over Republicans.
“Presidential elections historically have not been nearly as important to markets as most people think,” said Mark Motley, portfolio manager at Foster & Motley in Cincinnati. He noted that all presidential terms since President Jimmy Carter have seen healthy stock market returns, with few exceptions.
Election Predictions and Market Outlook
While predicting market movements based on election outcomes can be challenging, experts like Joseph Veranth, chief investment officer at Dana Investment Advisors, remain optimistic about the US economy’s current position. With inflation trending down and strong growth and earnings, there are positive indicators for the market moving forward.
Market volatility may increase in the short term due to the uncertainty surrounding the election results. However, historical data shows that markets tend to move higher regardless of which party is in power. Long term, a president’s policies have shown limited ability to predict sector performance, as evidenced by conflicting expectations surrounding energy investments during the Trump and Biden presidencies.
As Brad Houle, principal and head of fixed income at Ferguson Wellman Capital Management, advises, it is essential for investors not to make any hasty decisions based on election outcomes. Factors such as economic performance, stock market earnings, and investor sentiment will ultimately drive long-term stock market returns.
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