The Election and the Stock Market

If I’m not mistaken, there will be a U.S. presidential election tomorrow.

So, I’m going to write a post that will be extremely similar to the one I wrote on November 2nd, 2020, a day before the last election.

Presidential elections are big events and wrought with uncertainty. So, it’s not surprising that every four years, like clockwork, people worry what the presidential election will mean for their money.

“What happens if this candidate wins/loses?”

“Is the stock market and the economy doomed if a Democrat/Republican wins?”

While elections can be scary and the stock market is generally more volatile in the months surrounding the election, history has shown that tomorrow’s results will not matter to your long-term ability to build wealth.

As is typical heading into an election, there are predictions galore about what will happen to the stock market depending on which candidate wins. This isn’t new.

Republicans claimed Barack Obama would be terrible for the economy.

Democrats expected disaster for the economy and the stock market when Trump was elected.

Republicans said the stock market would crash under Joe Biden.

Instead, the economy grew under each president. And sure, there have been drawdowns in the stock market along the way, but every president has experienced drawdowns during their terms:

But even with these drawdowns, the stock market has continued to grow, no matter who the president has been:

In the rare case where a president will have a negative return during their term, like George W. Bush, it’s due to economic factors outside of the president’s control. Bush started his presidency just before the Dot-Com crash and left office before the market could recover from the 2008 housing crisis.

While politics may have some small influence on the stock market, the truth is it’s far less than most people like to believe. There are so many factors that contribute to stock market performance, many of which are outside the control of any political party or president.

Presidents get far too much blame when things go wrong and far too much credit when things go right.

I’ve also heard people say that they’re “waiting until after the election” to invest their cash. Sitting on cash waiting for the perfect time to invest rarely works.

One of two things will happen after the election — stocks will go up or they’ll go down. If they go up, you’ve missed out on the gains and you’ll want to wait for stocks to go down again before investing. If they go down, your fears are confirmed and you still won’t invest because things aren’t looking good. In either scenario, you’re still left waiting to pull the trigger.

Stocks might fall before, during, or after the election, but that’s not news because that chance always exists. Stocks go up or down every day, but your focus should be on long-term growth, not daily movements. What you need to succeed in investing is time in the market. The best time to invest was yesterday, and the second-best time is today.

You shouldn’t let politics interfere with your investment strategy. Your strategy should be built around your life goals and shouldn’t change based on who’s president.

Try not to lose too much sleep over what happens tomorrow night. Regardless of who wins, when you wake up on Wednesday morning I have a feeling you’ll find a way to be alright. Life goes on.

Thanks for reading!