We are being bombarded with media commentary that is geared towards shock and awe to increase ratings.  So many of us are nervous about the economy, the direction of our country, our social policies, and anything else you can name.  Anxiety is part of our daily lives now. However, there have always been challenges and difficulties in our past and we have always overcome them.  So I always like to come back to a quote by Sir John Templeton that says “The four most dangerous words in investing are: This time it’s different.”

So let’s examine at how the S&P 500 has performed in each election year to start.  Given all of the things our country has dealt with such as the Great Depression, World Wars I and II, Civil Rights, the Cold War, Watergate, and most recently the subprime mortgage crisis, what would your guess be to how many times since 1928 the S&P 500 has been negative in an election year?  If you guessed 4 out of 22 then you would be right*.  That is less than 1 out of 5 election years.

Then you might say, well if the wrong party gets into office then the economy is doomed.  You may not agree with the decisions or policies of a party, but the facts show that the party in office has very little impact on the performance of the stock market.1  Below is a chart from American Funds that shows the growth of $10,000 in the beginning of a presidency over the next 10 years.  This shows that there is little correlation between the party in office and the returns of the stock market*.1

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So what does this mean for you? It means that you shouldn’t stay on the sidelines. While you should consider the results of the election, you shouldn’t fear them when contemplating a financial plan. You shouldn’t think all is lost if the party you didn’t choose is in office. You should start planning because the longer you wait, the harder it may be to reach your goals.

 

Andy Faught is a Registered Principal of and offers Securities, Investment Advisory and Financial Planning Services through MML Investors Services, LLC, Member SIPC, 12 Cadillac Drive, Suite 440, Brentwood, TN  37027 (615) 309-6300.  Continuum Planning Partners is not a subsidiary or affiliate of MML Investors Services, LLC or it affiliated companies.

1*Source: American Funds “A Review of US Presidential Elections” Lit. No. MFCPBR-021-0316P Litho in USA CGD/CG/10204-S52707 – 2016.

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Continuum Planning Partners Post Author
Andy Faught, CFA, CFP®

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