Does the Presidential Election Affect the Stock Market?

May 25, 2016 | Blog, Investing

With the highly publicized and heated election coming up, a question I often get asked is “does the presidential election affect the stock market?”

Many are concerned that the huge uncertainty before the election can affect the stock market and plenty more are also curious about how a certain candidate will affect the stock market when he/she gets elected.

If you share these common concerns, it might be tempting to change your investment strategy to account for this immense uncertainty. Before you do, consider the following points.

In reality, how does the presidential election affect the stock market?

There is plenty of research on this subject, and while it would be great (especially for political experts) to tie future elections to the stock market, it’s almost impossible to do with certainty.

The truth is that it’s difficult to even tell how a Democrat or Republican victory will affect the stock market. While Democrats fared slightly better overall historically, there were huge variances – for instance, the average highest stock market returns were under a Republican President (Gerald Ford), and were followed by a disappointing stock market under Democratic President Carter.

That’s not to mention that the president isn’t acting in a vacuum. Everything from world events to a plethora of factors in the U.S. also affect the stock market.

How should you invest?

Since there’s no clear answer to the question “how does the presidential election affect the stock market?” you may be better served by tuning out the media hype and keeping your strategy the same. Timing the markets, especially during the uncertainty of an election, is near impossible, and will often cause more harm than good.

At LexION Capital, this wisdom drives our approach to investing. With your goals and needs in mind, we keep our eyes on the finish line, and don’t let short-term events like an election cycle affect how we manage your wealth. If you would like to learn more about our services, don’t hesitate to reach out today to start a conversation.

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