It’s only October, and I suspect we know that 2020 will appear in history books for many reasons. From a global pandemic to our 2020 election, we’ve seen story after story flood our timelines and try to snag our attention. Today, I want to focus on a question we’re hearing more often at Strathmore Capital Advisors: “How will the presidential election affect the stock markets?”
I understand why this question is top of mind for many of you. You’ve worked hard, set goals, and made it a point to create a financial plan. The uncertainty of a presidential election can feel like it will undermine your efforts. But here’s the critical point I want to leave with you today.
The noise about this election has been loud and never-ending for months now. However, who we elect as president is just one of many, many factors that contribute to what we see happening in the market. So, while the talking heads continue to suggest that everything hangs in the balance with this election, the connection between the outcome and the stock markets is weak at best.
History tells us something much different. Consider the length of a U.S. president’s term. At four years (or eight years over two terms), we’re talking about a small window of time. The ability of any individual president to affect the long-term direction of the markets remains questionable.
For instance, if we go clear back to President Truman, we see a steady uptick in the value of stocks across both Republican and Democratic presidencies. Of course, we’ve seen markets wiggle and jump around since 1945, including several recessions and market corrections. But that movement creates the very value we’re trying to capture by investing in stocks.
The key point remains: We have no reason to think that who wins the election this year will matter more to the markets than the winner of any prior election.
I know that 2020 has proven a challenge for us all. But for this issue, I believe the more important point remains. A successful financial plan depends in large part on things within our direct control. We can’t predict what the markets will do or how people will vote. We can control how much we save, how much we invest, where we invest, and how we behave. All those factors matter so much more in the long-term than what happens in November.
That said, I do encourage you to vote. We’re very blessed to live in a country that guarantees the right of its citizens to select its elected leaders. But as you cast your vote, please know that the outcome will remain only one of many factors that we’ll weigh in the future to help you make the best financial decisions possible.