Election Year Investing: Should You Be Worried About the Stock Market?

Navigating Your Finances in a Year of Change

It feels like every time you turn on the news, you're hit with another headline about the upcoming election. For new investors, all this noise and uncertainty can be unsettling. It’s natural to wonder, "What does all this political back-and-forth mean for my money and my financial future?"

It's a question we hear a lot, especially from those just starting their financial journey. When the future feels uncertain, our first instinct is often to pull back and play it safe. But when it comes to investing, is that the right move? Let's take a look at what history tells us about how the stock market behaves during an election year.

The Election Year Effect: A Different Kind of Market Pattern

You might be surprised to learn that the stock market often follows a different pattern during an election year compared to a typical year.

• In a normal year, the market tends to start and end strong, with a bit of a slump during the summer months.

• In an election year, however, the market historically gets off to a shakier start. The first few months can be a bit volatile as uncertainty is high. No one knows for sure who the final candidates will be, and the market doesn't like uncertainty.

But as the year progresses and the political landscape becomes clearer, the market tends to build momentum. This pattern shows us that while short-term jitters are common, they often give way to more stable growth once the initial uncertainty subsides.

The Most Important Chart for Long-Term Investors

It's easy to get caught up in the short-term noise of an election cycle. But if we zoom out and look at the bigger picture, a powerful truth emerges.

Since the late 1920s, the U.S. stock market has grown an incredible 23,000%. That growth wasn't because one particular party was in the White House. It's because, over the long term, the market has consistently trended upward.

Presidents from both parties have overseen periods of both market growth and downturns. But aside from major historical events like the Great Depression, the market has almost always been in a better place at the end of a president's term than it was at the beginning.

The Takeaway: Don't Mix Politics with Your Portfolio

So, what's the smartest move for a beginner investor in an election year?

The answer is simple: stick to your plan.

Don't let your personal feelings about a candidate or your fears about the outcome cloud your financial judgment. The most successful investors are the ones who tune out the short-term noise and focus on their long-term goals.

A great way to do this is by setting up automatic, recurring investments. By investing a little bit each week or month, you take the guesswork and emotion out of the equation. You'll be buying shares whether the market is up or down, a strategy that helps you build wealth steadily over time, regardless of who is in office.

The real secret to successful investing isn't about predicting elections; it's about consistency and time in the market.

Feeling uncertain about your investment strategy? At Renner Financial Group, we can help you build a long-term plan that aligns with your goals and helps you navigate any market condition with confidence. Contact us today for a complimentary consultation.