Should You Change Your Portfolio Following An Election

By Jennifer Napper, CFP®, CDFA®

As a CERTIFIED FINANCIAL PLANNER professional®, one of the most common questions I receive during election years is whether investors should adjust their portfolios based on the outcome. It's a valid concern, given the uncertainty that elections can bring. However, history and sound investment principles suggest that sticking to your long-term strategy is often the best course of action.

Historical Returns by Administration

Historically, the stock market has shown resilience and growth regardless of which party holds the presidency. For instance, the S&P 500 has delivered positive annualized returns under most presidents since 1929. Only three presidents have experienced negative returns for the S&P 500 during their terms. 1

The average annualized return for a president’s term is over 9.5% 1

Here’s a brief overview of stock market performance under recent presidents: 2

• Ronald Reagan: +67% (2nd term)
• George H.W. Bush: +51%
• Bill Clinton: +210% over two terms
• George W. Bush: -40%
• Barack Obama: +85% (1st term), +53% (2nd term)
• Donald Trump: +67%

These figures illustrate that while there are fluctuations, the market tends to recover and grow over the long term.

Importance of Sticking to Your Allocation

One of the key principles of investing is maintaining a diversified portfolio that aligns with your risk tolerance, time horizon, and financial goals. This strategy helps mitigate risks and smooth out returns over time. Reacting to political events by making significant changes to your portfolio can lead to poor timing and missed opportunities.

Market timing is notoriously difficult. Even professional investors struggle to predict short-term market movements accurately. Instead, focusing on what you can control—such as your asset allocation, investment costs, and tax efficiency—tends to yield better results.

Quelling Fears About Political Changes

It's natural to feel anxious about political changes, but it's important to remember that the stock market is influenced by a myriad of factors beyond who is in the White House. Economic fundamentals, corporate earnings, interest rates, and global events all play significant roles.

Moreover, the market often prices in expected political outcomes well before they occur. This means that by the time an election result is announced, much of the potential impact may already be reflected in stock prices.

Conclusion

While elections can bring uncertainty, history shows that the stock market has a remarkable ability to adapt and grow over time. By sticking to a well-thought-out investment plan and avoiding the temptation to make drastic changes based on political events, you can better position yourself for long-term success.

Remember, investing is a marathon, not a sprint. Stay focused on your long-term goals, maintain a diversified portfolio, and consult with your financial advisor to ensure your strategy remains aligned with your personal circumstances.

As your CERTIFIED FINANCIAL PLANNER professional® I know that, in many ways, your finances reflect your life and the changes you are facing. Simply put, I am not in the business of cold calculations. My business is people and possibilities.

Through all the chapters of your life, we are here for you.

1: Source: Dimensional Fund Advisors

2: Source: CNN

Jennifer Napper, CFP®, CDFA® is Vice President, Investments with Napper Wealth Planning of Raymond James in Walnut Creek, CA. She is a Certified Divorce Financial Analyst (CDFA®), specializing in helping anyone facing divorce to preserve their assets as well as plan for a brighter future. She can be reached at 925 952-5262 and Jennifer.Napper@raymondjames.com. Learn more about her at www.JenniferNapper.com.

2999 Oak Rd., Suite 1030, Walnut Creek, CA 94597.

Raymond James & Associates, Inc., member of New York Stock Exchange/SIPC

Opinions expressed are not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Past performance is not a guarantee of future results. Investing involves risk and investors may incur a profit or a loss.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transactions costs or other fees, which will affect actual investment performance. Past performance does not guarantee future results.