Broker Check
Stock Market Returns in an Election Year

Stock Market Returns in an Election Year

February 12, 2024

Election Jitters or Market Momentum? Navigating Stock Returns in 2024

With the 2024 elections heating up, whispers of potential market turmoil due to political uncertainty start circulating. But are these whispers grounded in reality, or merely fearmongering? Let's dive into the historical trends and explore what this means for your investment decisions.

The Historical Scorecard:

  • Positive Performance: According to Investopedia, surprisingly, history paints a mostly optimistic picture. The S&P 500 has delivered positive returns in 83.3% of election years since 1928, averaging a 11.53% gain during presidential election years.
  • Re-election Boost: Even better news for the current year, according to U.S. News, re-election years boast an even higher average gain of 12.2%.

Understanding the "Why":

  • Economic Focus: Elections may be exciting, but economic factors like interest rates, inflation, and corporate earnings hold more sway over market performance.
  • Investor Psychology: While some investors might react negatively to election uncertainty, others see it as a buying opportunity, leading to a balancing effect.
  • Long-Term Outlook: Election cycles are just a blip on the radar for long-term investors. Staying focused on your goals and avoiding short-term emotional decisions is key.

2024: A Different Ball Game?

While historical trends offer comfort, every election carries unique elements. This year's factors to consider include:

  • Geopolitical Tensions: Global conflicts and instability can add anxiety, potentially impacting investor confidence.
  • Elevated Inflation: Persistent inflation could prompt more aggressive Fed action, potentially slowing economic growth and affecting markets.
  • Tech Turmoil: Recent struggles in the tech sector, a major market driver, create some uncertainty.

Navigating the Storm:

Despite the unknowns, here's how you can stay informed and make sound decisions:

  • Stay Informed: Keep track of economic news, political developments, and market trends without getting overwhelmed.
  • Diversify Wisely: Spread your investments across different asset classes and sectors to mitigate risk.
  • Focus on the Long Term: Don't let election-related noise distract you from your long-term financial goals.
  • Seek Professional Guidance: Consider consulting a financial advisor for personalized advice based on your individual circumstances.

Remember: Predicting the future is impossible. A good example is the amount of times we were told a recession was on the way in 2023. While the 2024 elections might stir some turbulence, they are just one factor in a complex system. By staying informed, diversifying wisely, and focusing on your long-term goals, you can navigate the political storm and make informed investment decisions.