How to Invest in an Election Year

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” - Peter Lynch

After a strong start to the year, the markets have hit some turbulence.

Hotter-than-hoped-for inflation data, continuing military operations in the Middle East and heartburn surrounding the looming Presidential Election are the most frequently-cited concerns heading into April.

So what about those Presidential Elections? What moves should we be making to prepare for whoever is elected President on November 5th?

Luckily, I have some charts for you to mull over before making any dramatic moves. They might surprise you.

To summarize the chart below: Since Dwight D. Eisenhower’s inauguration in 1953, $1,000 invested in the S&P 500 only in the years when a Republican was President is worth $27,400 on a total return basis (through 3/20/24). It’s tempting to compare that to $61,800 of total returns if you invested only when a Democrat occupied the White House.

However, by staying invested that entire time, regardless of Presidential political party, the same $1,000 would be worth $1.7 million. (Source: Bespoke, with permission)

Luckily the answer in a Presidential Election year is pretty clear: Politics and investing don’t mix. 

Even more counterintuitive, investors also shouldn’t expect to make seemingly simple extrapolations about the market from a President’s political agenda. While campaigning in 2019, President Biden told a supporter, "I guarantee you. We're going to end fossil fuel." From Inauguration Day on 1/20/21 through 3/27/24, the S&P 500's best performing sector was Energy with a gain of 116% (Source: Bespoke, with permission). Back in 2020, virtually no one predicted Biden would be great for oil stocks.

Hang in there, and as always, give us a call if you want to chat about your portfolio or any other financial issues.