We hope that everyone is keeping safe and healthy. With the Presidential Election around the corner, there is a large amount of discussion surrounding potential outcomes and impacts. It is fair to say that this election cycle is unique in many respects, and with starkly contrasting politics there has been no shortage of news to digest. As the saying goes, “Elections have consequences.” However, that does not necessarily translate to meaningful long-term impacts on markets.
Looking at the past, political party control of the White House has had marginal effect on markets over the long term. Regardless of the political noise of crediting or blaming various administrations, a look at the chart below suggests long-term market returns have been historically apolitical, with the DOW returning similar results no matter who is in office.
Although there are varying elements of influence, markets overall tend to be resilient to such external factors, including control of Congress. A breakdown of post-election history below shows that, on average over the course of a full term, markets again are somewhat neutral with regard to party affiliations.
By Farrukh Kazmi
Like many general elections, there are usually intensely contrasting policy stances. Another factor that is frequently talked about is concern over potential market impact of tax policy changes. Contrary to some popular mantras, the chart below illustrates that strong equity markets can in fact occur in the years surrounding tax increases.
Of course, past performance does not guarantee future results, and there are several elements and policies to consider that could affect markets. With such an intensely contested election cycle and the accompanied uncertainty, short-term volatility could be expected. After the election is settled, the focus may likely once again shift back to fundamentals of the economy, including pandemic recovery data and ongoing stimulus potential.
As we’ve shown that elections and policy outcomes can have uncertain impacts, we would urge our clients to not let politics be the sole dictator of their investing strategy, and to continue to have a diligent approach with our team to manage assets. Regardless of the results of the 2020 Election, we are here to help you through this next phase of the market cycle.
Please stay safe and healthy, and feel free to reach out to us should you need to make any adjustments or even just to chat.
A & S Asset Management
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