Around Labor Day of each election cycle, we start receiving questions about what the presidential race will mean for the stock market.
History shows that, regardless of who wins, the market will forge ahead.
- According to First Trust Investments, there have been 24 presidential elections since the S&P 500 Index was formulated. In those 24 election years, the S&P 500 Index was positive 20 times, or 83% of the time!
- Since no single party consistently benefits the stock market, it is important to stay invested.
- While conventional wisdom might suggest that Republican policies are generally more business-friendly and therefore better for the stock market, historical data does not support this. The primary drivers of the market are macroeconomic factors such as corporate profits, interest rates, and inflation. These factors behave largely independently of current presidential and legislative actions.
But the election must affect something, right?
- Of course. The impact is mostly on your personal financial situation. Taxes, Social Security, estate planning, and RMDs are examples of fundamental financial topics driven by government policies that affect us all every year and usually remain unchanged for many years before Congress makes adjustments.
- Regarding the election, we focus on planning concepts and policies rather than the short-term market reaction. We consider several likely election outcomes and what adjustments make sense under different scenarios.
- For example, many provisions in the TCJA are set to expire at the end of 2025. This involves potential increases in tax rates, a possible reduction in the standard income tax deduction, and a significant cut in the estate tax exemption. These provisions are not guaranteed to be extended simply because of the election outcome; they must be passed by the House and Senate. The outcome of House elections and 34 Senate seats may increase or decrease the chances of these provisions being extended.
We recommend being agnostic about how the election affects the stock market because it largely doesn’t matter. We focus on the long-term policy changes that may result from the elections and how they fit into your financial plan.
Olympic Fun Fact! An Olympic gold medal is actually 95% silver and only 5% gold. That’s about 500g of silver and 6 grams of gold, which, at last week’s prices, is worth around $1,086.
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Securities offered through Triad Advisors, LLC?(Triad) member FINRA/SIPC. Investment Advisory services offered through?Osaic Advisory Services, LLC?(Osaic Advisory).?Triad?and?Osaic Advisory?are separately owned and other entities and/or marketing names, products or services referenced here are independent of?Triad?and?Osaic Advisory.
