Summer of Election Buzz

^{Written by: Trek Investment Committee}

Welcome to summer 2024! This is a time when we celebrate graduations and educational achievements. It’s a season of BBQs, summer holidays, and a period to rejuvenate for the remainder of the year. Every four years, this season also brings a major election. Both Republicans and Democrats will hold their national conventions this summer, leading to increased focus on the presidential elections in the upcoming months.

What’s the Impact of Elections?

As the presidential election approaches, investors may find themselves on edge, questioning the potential impact on the markets. It’s natural to feel uncertain during such periods, but it’s important to remember that markets cycle just like elections do. In fact, the market has shown positive performance in 20 out of 24 election years from 1928 to 2020, with negative returns occurring on four times.¹ This includes periods of significant political change and economic challenges. The market’s historical performance highlights the importance of maintaining a long-term perspective. Nevertheless, it’s important to recognize that future returns may not replicate past performance, despite any emerging patterns. Election years are not exception.

It’s also important to recognize that a presidential election is just one of the many factors that can influence markets. Economic indicators such as GDP growth, unemployment rates, inflation, and corporate earnings play a role in shaping market performance. Additionally, global events, technological advancements, and monetary policy decisions also contribute to market dynamics.

For instance, while the 2020 election cycles were marked by intense political discourse and uncertainty due to the COVID-19 pandemic, the market ended the year with record high.² This example underscores the importance of not letting short-term events dictate long-term investment decisions.

To navigate market uncertainty effectively, consider the following strategies:

• Review your risk tolerance: Regularly reassess your risk tolerance to ensure your investment strategy aligns with your financial goals and comfort level.
• Stay informed: Stay up to date with the latest news but avoid reacting impulsively to daily news cycles. Gather information from reliable sources and be sure to take a balanced view.
• Focus on long-term goals: Keep your long-term financial goals front and center. Resist the urge to make drastic changes based on short-term market fluctuations or election-related news. Your financial plan should be designed to weather various market conditions.

Stay Focused

While presidential elections can introduce uncertainty and volatility into the markets, history has shown that maintaining a long-term perspective is key. By focusing on your personal goals, risk tolerance, and broader economic factors, you can navigate election cycles and other market events with confidence. Stay disciplined, stay informed, and keep your eye on the long-term horizon.