Elections have always been a time of uncertainty for markets, with investors wondering how political changes might affect their portfolios. However, history tells us that markets are resilient, and long-term strategies often withstand the ups and downs of election cycles. Here’s how elections impact markets and why sticking to your plan can lead to strong returns. 1. Market Uncertainty vs. Political Affiliation One of the key drivers of market fluctuations during elections is uncertainty, not the political party in power. Markets generally dislike uncertainty, and elections introduce a sense of unpredictability as policies and leadership could shift. However, it’s important to note that since World War II, no political party has consistently experienced superior market returns. This suggests that while short-term volatility may occur, the markets have trended upwards over the long term, regardless of who holds office. For investors, this is a critical reminder: rather than reacting to the headlines, focus on the policies that will likely impact the market, such as tax reforms or regulatory changes, and not the personalities involved. 2. Historical Election Year Returns Historically, election years have been positive for investors who stayed the course. In 20 of the last 23 election years, a balanced 60/40 portfolio (60% stocks, 40% bonds) finished in positive territory. On average, election years delivered an 8.5% return. The three exceptions were due to broader macroeconomic factors, not political outcomes. This data demonstrates that, despite the uncertainties elections may bring, staying invested during these times has typically paid off. Pulling out of the market or drastically changing your investment strategy based on election results can lead to missed opportunities for growth. 3. The Impact of Tax Policies Tax policy changes are often a focal point during election cycles, and they can indeed influence markets. For example, past tax hikes have had mixed effects on market performance. Between 1931-1932, tax increases contributed to a market decline of -27.9%. However, from 1934-1936, the market saw a 24.9% increase despite higher taxes. More recent periods of tax changes, such as the 2012-2013 increases in individual and capital gains taxes, coincided with a 23.9% market gain. This historical perspective underscores that while tax policy changes can have short-term effects, they do not typically dictate long-term market trends. Investors should be prepared for potential policy changes, such as the expiration of the Tax Cuts & Jobs Act in 2025, but not allow these potential shifts to derail a well-thought-out investment plan. 4. Sticking to the Plan The most important takeaway for investors is that staying the course during election years and beyond has historically been a winning strategy. Research shows that forward 4-year returns following elections have been robust, regardless of the outcome. Reacting emotionally or making hasty changes in response to political shifts can undermine long-term goals. In times of uncertainty, it’s easy to feel compelled to make adjustments. However, having a solid investment plan, tailored to your goals and risk tolerance, means you shouldn’t need to react to short-term events, including elections. Webinar Invitation To dive deeper into how elections and other global events influence markets, join Stanton Advisory Group for an exclusive webinar on October 14th at 3 p.m. CST. In partnership with financial experts, we’ll explore more on this topic and provide actionable insights for navigating election year volatility. Email us to receive the registration link. Call to Action If you’re concerned about how elections might affect your portfolio or are unsure whether your current strategy is optimized for the long term, now is the time to take action. Schedule a consultation with Stanton Advisory Group today to review your plan and ensure you’re on track for financial success, regardless of the political landscape. Disclosure: Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. This material does not constitute legal, tax, securities, or investment advice. Consult a licensed professional for tailored advice.