Does the upcoming election have your thinking more about your investments?
by Nathan Wyatt
If so, you are not alone. Each election cycle, I can’t help but think back to the 2000 election. Presidential elections can be tough on the nerves, but if you remember back to the year 2000, the final outcome was not decided until December, meaning even more prolonged volatility than normal. At the time, I was a relatively new advisor and quickly learned that politics can bring strong emotions and biases to investing. We had a lot of volatility for several months that year. Prolonged uncertainty can test our resolve. Looking back, it solidified one of the underlying philosophies I’ve come to live by in my now 20 plus year career (and my philosophy is backed up by good data). When it comes to elections, we are wise to put our emotions aside. No doubt about it, we will likely see fluctuations in the markets in the coming months, but ultimately the winner of the presidential election has very little impact on long-term market results.
As we approach the upcoming election, here are three things I hope you consider:
- Your time horizon and goals should determine what your portfolio looks like. Don’t allow predictions and outcomes to influence your investment strategy. As you can see from the chart above, there is very little evidence that election outcomes affect the overall performance of long-term returns.
- Expect volatility, but don’t fear it. In general, the best response to volatility is staying the course. I’m sure you have heard me say before, but “timing the market is rarely a winning long-term investment strategy.” If someone says they can predict the future, they are selling you something. Having said that, now may be a good time to take a step back and make sure you are comfortable with your asset allocation, given that we are likely to experience a good dose of volatility in the weeks (and perhaps months) ahead.
- Our job at the Investment Service Center is to team up with our clients and know and understand your long-term investment objectives. If the election has you concerned, or if your objectives have changed recently, let’s talk. We are here to guide you through any concerns or changes you may be considering as a result of election year opportunities or volatility.