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Chart of the Month: Investing Based on Politics is a Bad Idea

Chart of the Month: Investing Based on Politics is a Bad Idea

As the 2024 presidential election approaches, Americans are preparing to vote in what polls forecast to be a tight race. Like many investors, you may wonder how the election outcome could affect financial markets and whether you should change your investment strategy.

For your convenience, we’ve also provided a PDF copy of the Chart of the Month: Investing Based on Politics is a Bad Idea.

While elected leaders can influence economic growth by enacting laws and regulations, data suggests that who occupies the White House has little to no impact on investment performance. Fundamental factors like corporate earnings growth and valuations impact the stock market far more than political headlines. Politicians make many promises during election years, but these often go unfulfilled because of the government’s system of checks and balances. Moreover, the economic outcomes of policies are less predictable than officials think, with the economy more influenced by factors like job growth, interest rates, and inflation.

The charts below illustrate the financial impact of allowing political beliefs to influence investment decisions. The chart on the left graphs the S&P 500 Index starting with Dwight Eisenhower’s presidency in 1953 and is color-coded by political party. The graph on the right compares the investment performance of portfolio decisions made based on political affiliation. If an investor only invested in the stock market when a Republican was President, $10,000 would have grown into $83k today, excluding dividends. Investing only when a Democrat was President would have returned $254k. While the gap may seem wide, if an investor ignored the president’s political party and remained invested, the $10,000 would have grown to over $2.1 million.

Political views can stir strong emotions, but making investment choices based on those feelings can lead to poor portfolio decisions. Instead, it’s better to focus on time-tested investment principles and avoid letting politics influence your long-term strategy. The U.S. economy’s success, growth, and resiliency don’t change with each new election, and neither should your investment strategy. It’s best to express political opinions at the ballot box, not in your portfolio.

 

Chart Of The Month: Investing Based On Politics Is A Bad Idea

 


Disclosure

The information and opinions provided herein are provided as general market commentary only and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.

Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.

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We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.

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Mike Minter
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Shareholder | Chief Investment Officer

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