Election Results & Market Returns
Franklin D. Roosevelt said, “The only limit to our realization of tomorrow will be our doubts of today.” Investor doubts grow as presidential campaigns spotlight the country’s challenges. However, even with election year rhetoric amplifying the negative, it is important to focus on your vision for the future.
Keep in mind the following:
Successful long-term investors stay the course and rely on time rather than timing.
Investment success has depended more on the strength and resilience of the American economy than on which candidate or party holds office.
The experience and time-tested process of your investment manager can be an important contributor to your long-term investment success.
There have always been tumultuous events, such as market declines and recessions, businesses going bankrupt, weather-related calamities, labor market struggles, civil unrest and protest, and overseas conflict & war. The current economic and political challenges may seem unprecedented, but a look back shows that controversy and uncertainty have surrounded every campaign.
There’s nothing wrong with wanting your candidate to win, but investors can run into trouble when they place too much importance on election results. That’s because U.S. elections have, historically speaking, made essentially no difference when it comes to long-term investment returns.
What should matter more to investors is staying invested. Although past results are not predictive of future returns, a US$1,000 investment in the S&P 500 made when Franklin D. Roosevelt took office would have been worth over US$14 million today. During this time there have been exactly seven Democratic and seven Republican presidents. Getting out of the market to avoid a certain party or candidate in office could have severely detracted from an investor’s long-term returns.
By design, elections have clear winners and losers. But the real winners were investors who avoided the temptation to base their decisions around election results and stayed invested for the long haul.
Original Article: 3 mistakes investors make during U.S. election years
At Financial Forum, we have been showing the following chart to clients for years upon years, so you may have seen it before. Nevertheless it provides valuable context in these tumultuous times!
The Investment Company of America®: 21 elections and counting
As you can see in the mountain chart below, a hypothetical $10,000 investment in The Investment Company of America has grown steadily and significantly over the fund’s 85-year history. Additionally, a hypothetical $10,000 investment in ICA made at the beginning of an election year was always larger 10 years down the road.
Click here for the enlarged image
Sources: Capital Group, Standard & Poor’s. Dividend calculations sourced from Refinitiv InvestmentView+.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.