Election Years & Stock Losses

From now until November, the most common question we’ll get is, “Do you still think now is a good time to be investing with the election coming up?”

We have no useful thoughts on who will win but, historically, that detail hasn’t mattered.  Election years don’t tend to cause the stock markets to lose money.  Since 1926 there have been 24 Presidential elections.  20 of those years were positive for the stock market and 4 of those were negative.  The important asterisk for the negative years is that they weren’t caused by the elections.  They were all a function of some other, large historic economic event.  For example, the election of 1932 was held during the Great Depression.  The election of 1940 was during WWII.  The election in 2000 was during the bursting of the Dot Com bubble.  The election of 2008 was during the Financial Crisis.  Outside of those years, every other election year has been positive. 

As Morgan Housel writes in his book, Same as Ever, “The biggest risk and the most important news story of the next ten years will be something nobody is talking about today.”

To his point, we know about elections and certainly people are talking about them. Those aren’t the things that make valuations go down.  It is all the other stuff. And since we don’t know what any of that other stuff is, or will be, our best course of action is to stay invested and continue executing on your financial plan.