Why Markets Don’t Care About Who the President Is
The weeks or months following a presidential election can stir conversations about how the results might impact the stock market. It’s natural to wonder if a new administration’s policies or priorities will affect your investments. However, history shows us that the market’s long-term trajectory has been largely independent of who occupies the Oval Office.
Let’s explore why markets have risen over time regardless of political leadership and how you can focus on what matters for your financial success.
Markets Reflect a Complex World
The stock market is a complex, global system influenced by countless factors, from corporate earnings and consumer behavior to geopolitical events and technological innovation. While a president’s policies can influence specific industries or sectors, the overall market has tended to look beyond politics and focus on broader economic conditions.
For example, a 2024 Dimensional Fund Advisors (DFA) study examined nearly a century of U.S. presidential terms and found a consistent upward trend in U.S. equities regardless of the administration. It’s important to remember that past performance does not indicate future results. However, this resilience underscores the market’s historical ability to adapt to changing political and economic environments.
The Long-Term View
One of the most important lessons from market history is the power of long-term investing. Consider this fact from the DFA article: If you had invested $1 in the S&P 500 in January 1926 and left it untouched, that dollar would have grown substantially over the decades. The growth wouldn’t have been smooth—markets have experienced recessions, wars, and global crises—but the overall trend was upward.
This upward trajectory reflects the ingenuity and productivity of businesses over time. Companies continue to innovate, find efficiencies, and meet consumer needs, driving economic growth and, by extension, stock market returns.
Avoid Emotional Decisions
Post-election periods can bring heightened emotions, especially if the results spark concern about the future. Emotional reactions, however, can lead to costly investment mistakes. For instance, selling stocks during a market dip out of fear can lock in losses and make it harder to recover when the market rebounds.
We believe staying invested—even during uncertain times—is often the best strategy. We generally don’t recommend trying to time the market by predicting short-term movements. Instead, we adhere to a disciplined, long-term approach to investing to help weather short-term volatility and achieve financial goals.
Diversification: A Key Strategy
Diversification is an important principle for navigating market uncertainty. By spreading your investments across various asset classes—such as stocks, bonds, and real estate—you can help reduce the impact of any single investment’s performance on your overall portfolio. Diversifying across industries and geographic regions can also help mitigate risks within the stock market.
For example, if one sector—like technology—faces challenges due to new regulations, gains in other areas—such as healthcare or energy—could offset those losses.
Why Markets Don’t “Care” About Presidents
It might feel counterintuitive to say that markets don’t care about who the president is, but the data supports this idea. The reason lies in the collective power of investors. Markets are forward-looking, meaning they price in expectations for the future. By the time an election is decided, much of the potential impact of a new administration’s policies is already reflected in stock prices.
Moreover, the president is only one player in a broader system. Congress, the Federal Reserve, global markets, and countless other factors also influence economic and market outcomes. This interconnectedness helps dilute the impact of any single individual or policy.
Staying Focused on Your Goals
Focusing on your financial goals can be more productive than getting caught up in political headlines. Ask yourself:
Are my investments aligned with my long-term objectives?
Do I have an emergency fund to cover short-term needs?
Am I taking advantage of tax-advantaged accounts like IRAs or 401(k)s?
Regularly reviewing your financial plan and portfolio can help you stay on track, regardless of external events. A financial advisor can be a valuable partner in this process, offering strategic guidance and emotional support to help you think long-term.
The Role of a Financial Advisor
Working with a financial advisor doesn’t mean you’re delegating all your decisions. Instead, it’s a collaborative relationship where your advisor helps you make informed choices and avoid common pitfalls. For example, an advisor can help:
Provide perspective during market volatility.
Design a diversified portfolio tailored to your risk tolerance and goals.
Guide you through tax-efficient strategies, such as Roth conversions or managing capital gains.
Having a trusted professional by your side can make staying disciplined and focused on what truly matters easier. A fiduciary advisor will put your interests first so you can feel more confident their advice is objective and in your interests.
Conclusion
Presidential elections may dominate the news cycle, but they’re just one of many factors influencing the stock market. You can build more resilience into your investment strategy by taking a long-term view, staying diversified, and avoiding emotional decisions. Remember, the market’s upward march over the past century is a testament to its ability to thrive in various political and economic environments.
If you have questions about your portfolio or need help crafting a strategy that aligns with your goals, consider reaching out to a financial advisor. Their expertise can help you navigate uncertainty and stay focused on your financial future.
Schedule a complimentary, 15-minute chat with a fee-only, fiduciary financial advisor today to discuss your personal situation.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor with offices in Granite Bay and Folsom, CA, and Lehi and Logan, UT. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.