How a Presidential Election Affects the Market

Stock market performance in presidential election years isn’t actually dependent on the election itself. Analysis of historical stock market performance shows that the shifts and changes are similar no matter who is elected, and that economic and inflation trends matter more to stock market performance than an election. While policies can affect those, often a more complex set of factors is involved.

Overall, the market doesn’t react well to uncertainty, and elections can bring uncertainty. History has shown that the time around the election may bring more market volatility than normal, meaning there will be more frequent, and maybe more significant, ups and downs. 

However, the choice of which party has the White House has not historically had much of a long-term impact on the stock market — and that’s what you should be thinking about. It’s true that certain sectors of the economy may benefit more than others due to the winning party’s priorities (for instance, carbon energy versus renewable energy), but the impact on the overall market is slight and caused by emotional investing, not the election itself.

The big picture story is that year after year, decade after decade, the economy continues to grow, regardless of the outcome in the election.

What to Expect in the 2024 Election

Certain factors in the 2024 election, such as candidates’ ages and legal issues, could have an effect on market volatility, especially if anything unexpected occurs. Furthermore, as 2020 showed, the period of time between Election Day and the certification of the winner, in part due to mail-in voting, can last longer than people expect, leading to increased volatility in the short-term. 

What You Should Do

Remember, a volatile market is not necessarily a risk to your portfolio. What matters is how you respond to that volatility. You should ensure that your portfolio is balanced and aligned with your risk tolerance. Then, take a deep breath and hold steady. Keep your long-term perspective in mind as you move toward your goals. Remember that the election is determining the next four years, but your investment decisions will impact the rest of your life. 

Be Prepared in Every Season 

Your local Farm Bureau agent can help if you have questions about balancing your portfolio and managing your risk, no matter the political climate.