By Donald Albach
Presidential election years act as a crucible of anticipation and uncertainty for investors, prompting a meticulous examination of historical market performance. Understanding how various asset classes, including bonds and real estate, have weathered these pivotal years provides investors with valuable insights. In this article, we delve into the historical performance of the S&P 500, emerging markets, developed international markets, small-cap, mid-cap funds, bonds, and real estate during presidential election years, including an analysis of the number of positive and negative market returns over the past two decades.
S&P 500 Performance
The S&P 500 (a benchmark for the U.S. stock market tracking the stock performance of 500 of the largest companies listed on stock exchanges in the U.S.) has exhibited diverse patterns during the presidential election years. Historical data indicates an overall tendency for positive returns, albeit with increased volatility, particularly in the first and second quarters. (1) Investors should prepare for short-term fluctuations while maintaining a long-term investment perspective.
Other Asset Classes
- Emerging Markets: Emerging markets, characterized by developing economies, have shown mixed performance during presidential election years. (2) Influences such as trade policies, global economic conditions, and political stability impact these markets. Diversification remains crucial to managing risks associated with emerging market investments.
- Developed International: Developed international markets, featuring established financial systems, experience varying performance during election years. (3) Global economic shifts, trade relations, and geopolitical events play pivotal roles. Diversifying across regions allows investors to navigate uncertainties and potentially capitalize on opportunities.
- Small-Cap and Mid-Cap Funds: Small-cap and mid-cap funds, representing companies of smaller market capitalizations, exhibit sensitivity to economic changes and government policies. During election years, increased volatility is expected, offering both risks and growth opportunities. Investors should carefully assess their risk tolerance and consider the potential rewards associated with these asset classes.
- Bonds: Bonds, known for stability, act as a counterbalance to equity market volatility during election years. Government bonds, corporate bonds, and municipal bonds may experience increased demand as investors seek safety. Including bonds in a diversified portfolio can provide stability and income.
- Real Estate: Real estate, encompassing both residential and commercial sectors, can be influenced by election-related policies and economic conditions. Historically, real estate has demonstrated resilience and can serve as a hedge against market volatility during election years. Investors may find opportunities investing in real estate for diversification in their portfolios.
Analyzing Historical Market Returns
Over the past 20 presidential election years, a notable trend has emerged as positive market returns have outweighed negative returns. (4) While volatility remains a factor, most of these years have seen the market moving in a positive direction, emphasizing the potential for growth amid political transitions.
Navigating the Terrain With Millstone Financial Group
Given the intricate dynamics of market movements during presidential election years, seeking professional advice becomes paramount. Millstone Financial Group, as a registered investment advisor, is well-equipped to offer personalized guidance, considering an investor’s financial goals, risk tolerance, and time horizon. Our firm believes comprehensive financial planning, including considerations for diverse asset classes like bonds and real estate, is vital for weathering market fluctuations.
In understanding the historical performance of the S&P 500 and an array of asset classes during presidential election years, investors must approach the markets with a well-considered strategy. Diversification, risk management, and a focus on the long term are critical components of a successful investment approach. Collaborating with the Millstone Financial Group team ensures access to expertise, helping investors navigate the complexities and capitalize on opportunities in the ever-evolving financial landscape. The historical prevalence of positive market returns during election years further underscores the potential for growth in well-structured portfolios.
At Millstone Financial Group, we believe your success relies on the strength of your relationship with your advisor, and so, it’s our mission to make our clients and their goals our first priority. By crafting tailored financial plans based on your individual dreams and struggles, we can help you weather the challenging times while providing you with solutions to better reach your financial goals. Schedule a complimentary consultation by calling (732) 385-8544 or emailing [email protected].
About Don
Donald Albach is President and Co-Founder of Millstone Financial Group, an independent financial advisory firm helping pre-retirees and retirees pursue their retirement goals. Don has over 26 years of experience in the financial industry and focuses on retirement planning, designing retirement income planning strategies to guide his clients toward financial independence. Don graduated from Norwich University, the nation’s oldest private military college, and has worked his entire career in the financial services industry, including First Boston, MetLife, and C&A Financial Group. He co-founded Millstone Financial Group in 2012 with Michael Russo. Don and Mike met each other while working at MetLife, and in 2003 both he and Mike were recruited to work at C&A Financial Group, where they spent the next 10 years. It was at C&A Financial Group where they decided they needed to start their own company that strictly focused on retirement income planning. They both had a desire to help people navigate the complexities of retirement and created Millstone Financial to do just that.
Don currently lives in Monroe Township, NJ, with his wife, Tina, to whom he has been married since 1992. They have three children together: Paige, Donny, and Ally. Don’s two passions are sailing and watching college football, and he also enjoys cooking Sunday dinner for his family. To learn more about Don, connect with him on LinkedIn.
Advisory services are offered through Millstone Financial Group Limited Liability Company, a Registered Investment Advisor in the State of New Jersey. Insurance products and services are offered through Millstone Financial Group Limited Liability Company. Millstone Financial Group Limited Liability Company is not affiliated with or endorsed by the Social Security Administration or any government agency.
All material discussed is for informational purposes only. Opinions expressed are solely those of Millstone Financial Group Limited Liability Company and staff. All topics covered are believed to be from reliable sources; however, Millstone Financial Group Limited Liability Company makes no representations as to its accuracy or completeness. Investing involves risk including the loss of principle.
This article shall in no way be construed as a solicitation to sell securities or investment advisory services to residents of any state other than New Jersey, or where otherwise permitted. All information and ideas should be discussed in detail with your individual adviser prior to implementation.
This material is intended to provide general financial education and is not written or intended as tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
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(1) Sonenshine, Jacob, Barrons, November 2023
(2) Song, Zijia, Bloomberg, October 2023
(3) Song, Zijia, Bloomberg, October 2023
(4) “We Looked at How the Stock Market Performed Under Every U.S. President Since Truman – And the Results Will Surprise You,” Forbes, July 2020
