With the weight of the election bearing down on all of us as the day grows closer and closer, many people turn to polling data, political pundits and online correspondence to get an idea of what America might look like come January 20th of next year.
The masses are concerned with many of the hot-button issues that we all see littering newspapers and mainstream media articles, taxes, healthcare, foreign policy and so on. But what far fewer seem to be aware of is not only how the stock market will change immediately following the election, but what smaller changes to your portfolio will depend entirely upon who assumes the Oval Office in January.
The only thing that we know for sure right now is that we don’t know what will happen for sure should either Hillary Clinton or Donald Trump win Tuesday’s election. Projections and predictions from investors come in spades and are often fairly severe; Marc Farber claims that Donald Trump might “destroy the economy” should he be elected, but Hillary Clinton may as well “destroy the world.”
And while those predictions may seem outlandish, it’s important to do research on how each candidate’s policies and platforms may impact you and your investments.
The election and inauguration of a new president has, historically, seen moderate Dow Jones growth. While the average 10.4% Dow growth in pre-election years seems strong, that number drops a bit to around 6% during election years. New presidents see an average of 2.5% growth during their first terms.
As for which of Donald Trump or Hillary Clinton will be better for your portfolio, many analytical models and past trends indicate that who is elected might not have much of an impact on you at all.
The best advice that one can probably get regarding the buying and selling of stocks during election years is this: hold off on adjusting and rebalancing your portfolio until the spring. It’s wise not to jump into rumors too hastily that surround election-year stock market happenings, but it’s a fact that equities typically slow down in May, presenting a great rebalancing opportunity.
So while adjusting might not be in your best interest just yet, examining historical trends in the data is still worth a minute of your time. Historically, market growth is typically a bit higher when Democrats are in office; likewise when the incumbent party remains in office. However some of the best growth often occurs when a Democrat is in charge of the White House with a Republican congress.
So while it may not be easy (or possible) to accurately predict which candidate will be better for your portfolio or what actions to take right now, one thing remains a near certainty, there will be volatility after the election if history holds true.