As 2020 and the Presidential election loom on the horizon, many investors may feel a certain amount of unease. Elections can bring with them explosive headlines and a general sense of unpredictability. This may be more compounded in today’s world where it seems that a Presidential tweet can send the market up or down. However, do these fears warrant a drastic change to your portfolio?
What Can History Tell Us?
If you take a look all the way back to 1928, 82% of the time the S&P 500 has ended the year positive during an election year. The average return for all the election years going back to 1928 is just over 11% and averaged almost 17% for the positive years. Looking back to our two last election years in 2016 and 2012 the S&P 500 achieved returns of 12% and 16% respectively. Not too shabby or a reason to run for the hills.
Do’s and Don’ts
First, the don’ts – don’t put too much weight on headlines, current events, and widely expected occurrences. More than likely the market has already priced in these factors. You could be damaging your long-term results by putting too much stock into these events.
Instead of making a guess on where the market is going in an election year, basing your decisions on emotions stirred up the media, we recommend you maintain a focused and disciplined approach. This means concentrating on your financial goals and / or needs, your risk tolerance, and time horizon.
A Great Time for a Portfolio Check-up
As we head into 2020 take some time to evaluate your current portfolio. It might prove a welcome distraction from the onslaught of election coverage! Is it aligned with your financial goals? Have your needs or time horizon changed? If not, it might be time for a portfolio check-up.