There are plenty of political ramifications riding on the U.S. presidential election. But historically, the stock market tends to perform about the same regardless of the election.
Fintech platform Wealthfront analyzed historical data and found that election years don’t really impact market performance, and neither does the winner of the election. The analysis found that the mean annual total return of the U.S. stock market was 12.1% during nonelection years and 11.7% in election years, with Wealthfront describing the difference as statistically insignificant.
The company also looked at how its retail investor clients were positioning themselves going into the 2024 election. It found that clients were holding about 53% of their portfolio in stocks, 34% in cash, 11% in fixed income and the remaining 2% in assets like crypto, commodities and REITs.
It added that clients weren’t making big changes to their portfolios going into the election, which it said reflects investors remaining focused on long-term strategy.
“History tells us that while elections may introduce temporary market shifts, they rarely have lasting effects on overall performance and are trends not worth focusing on. Instead of trying to time the market, it’s better to stay the course and concentrate on what you can control — such as managing your risk by investing in a portfolio that suits your risk tolerance, keeping costs low with low-cost index funds, and minimizing taxes through strategies like automatic tax-loss harvesting,” Alex Michalka, vice president of investment research at Wealthfront, said in a statement.
