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Presidential Elections and the Markets

March 07, 2024



Presidential Elections and the Markets


Each time a Presidential election year approaches, there's a chorus of warnings from experts about potential market volatility that could shake our portfolios. However, recent research from Vanguard Funds suggests that these warnings may not hold true. Despite the significant impact of presidential elections on public policy direction, they argue that election cycles should not dictate investment decisions.

Vanguard Funds recently published an article, which can be found at the following link: Presidential Elections Matter, But Not So Much When It Comes to Your Investments. This research, tracing back to 1860, reveals no statistically significant relationship between the performance of a moderate 60/40 portfolio during election years compared to non-election years.

Furthermore, contrary to common belief, the article notes that the expected pre- and post-election market volatility hasn't materialized consistently. Examining the period from 1984 to 2020, Vanguard found that annualized volatility was lower in the 100 days leading up to and following an election. In essence, the markets tend to disregard the noise surrounding elections and their outcomes.

This isn't to dismiss the importance of factors like tax rates, government spending, trade policies, and regulations, which undoubtedly influence investor behavior and market performance over the long term. A myriad of domestic and global factors continually shape our economy and various securities markets.

At Compass Capital Management, we diligently monitor global events on a day-to-day basis, whether it's a Presidential election, international conflicts, or a global pandemic. However, we remain steadfast in focusing on our long-term investment objectives, and we encourage you to do the same.

As always, we appreciate your trust in us to manage your investments. Our relationship with you is paramount, and we are committed to assisting you in achieving your financial goals.