Why Presidential Elections Don't Matter to Investors
Elections are just one of an almost infinite number of things that influence stock markets, many of which are uncertain.
Whilst we can’t predict the future, we can use the past to help us make investment decisions moving forward.
However, history shows us that in spite of blanket media coverage on 24-hour news channels, and sensationalist newspaper headlines, matters such as government elections have very little impact on long-term investment strategy.
Commenting on the current landscape and what may happen next, Skybound's Head of Investment Research Jonathon Curtis said:
"Elections are just one of an almost infinite number of things that influence stock markets, many of which are uncertain. That’s why we don’t try to predict what they’ll do next.
Instead we believe having a diversified portfolio, investing across a broad range of asset classes, regions and industries, is the best way to prepare for whatever the markets have in store.
It doesn’t guarantee your portfolio will be immune from every short-term shock, but over the long-term, it should allow you to capture market gains in the good times, and provide some protection if things turn sour."
This year's US election appears like it could still go either way and there is a very real possibility the loser could mount legal proceedings. Whatever the outcome though, we think it’s important to look beyond the headlines. After all, there are a host of other things that could affect the economic landscape
It’s also important to keep in mind that the economy and the markets aren’t the same thing. While record falls in GDP were being reported earlier in the year, markets were actually on the rise again. The same thing happened in 2009, for example, when much of the world was still reeling from the great financial crisis, yet markets were rebounding.
As you can see from the chart above, in recent times Markets have dipped and recovered on the back of newly elected US Presidents as well as events such as the Global Credit Crisis of 2007 and the COVID-19 Pandemic earlier this year before rallying and going on to reach new highs.
Discussing how to guard against market volatility Curtis added;
"That’s not to say we’re predicting what markets will do. There are so many things that influence them, many of which are uncertain. That’s why we believe having a diversified portfolio, investing across a broad range of asset classes, regions and sectors, remains so important. It doesn’t guarantee your portfolio will be immune from every short-term shock, but over the long-term, it should allow your portfolio to capture market gains in the good times, and provide some protection if things turn sour."
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Having assisted many international investors already, Skybound are perfectly placed to guide you through these times of uncertainty.
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