Next week Americans will head to the polls to decide who will be the next president of our great country.
This election has stoked a lot of emotions for people. Some despise Hilary; others find Trump repulsive. This article is not about who we think would be the best President of the United States or who we would vote for.
Instead, we are going to answer the question that we have been asked over and over in the weeks leading up to the election.
“Should I send my portfolio to cash and get back in after the election?”
As long-term investors, we believe that no client should be making a significant change to their portfolio based on short-term market volatility. We have found, and other studies have backed up our findings, that trying to outguess the market is a loser’s game. Most people forget that in the weeks leading up to the election to the 2012 election the market dropped over 7%. Two years after the 2012 election, the market was up over 40%. If you sold, you might have had a piece of mind (short-term), but you also missed one of the greatest bull markets in history.
The chart below is of the S&P 500 from August of 2012 to August of 2014. Can you even spot the “sell off” during the 2012 Presidential election?
(Image courtesy of Y-charts)
“ What President is better for the stock market? “
In short, it doesn’t matter.
In the chart below you will notice we had looked at when the oval office was held by a Republican compared to a democrat. As you can see, the chart is moving the lower left to the upper right (that’s good). It doesn’t matter who the president is: the stock market rewards long-term patient investors.
(Image courtesy of Dimensional Fund Advisors)
Remember what we always say, “if the market is going down, you should be thinking about buying not selling.”
Participating in the stock market is the single best way for most people to grow their assets but it is a long-term endeavor. Making decisions based on short-term fear and emotions could lead to costly mistakes. Those mistakes could harm your financial future much worse than the short-term drop in the market leading up the election.