The 2024 Election: Financial Impacts and Why Staying the Course is Key

November 5th, Election Day, is just around the corner, and it’s becoming more common to hear financial pundits speculate about how the markets will react to different outcomes. With all the noise, it can be difficult to determine what will truly impact your personal financial situation. Here’s the key: Stay the course!

While it’s true that election years historically bring uncertainty to both the market and one’s life, our role as your fiduciary advisory team is to ensure that your financial plan, investment strategy, and risk profile are aligned to navigate such challenges. Through effective planning, we aim to help you maintain a long-term focus and stay on track with your financial goals.

Election Outcomes and Market Movements: What History Tells Us

Even if we know, intellectually, that staying the course is the right choice, it’s reassuring to let historical market data guide us further. Know that, regardless of which political party wins, markets typically experience short-term volatility around elections, but recover in the long term. The key is recognizing that markets don’t react solely to election outcomes—they respond to broader economic factors such as inflation, interest rates, and global events. While politicians can influence policy, they do not single-handedly dictate market performance.
Here are some tangible historical factors to consider:

• Stock market volatility tends to increase before elections, often driven by uncertainty rather than actual economic changes. Data from BlackRock’s October edition of their “Student of the Market” shows that markets generally report losses in October leading up to an election, but turn positive in November and December once election results are known (see chart below).

This pattern is intuitively unsurprising. October is the final month before the election, and once the outcome is certain, markets typically resume their long-term trend toward positive monthly returns.

• Markets are resilient over time, and the longer one stays invested, the higher the probability of seeing positive returns. Data from JP Morgan’s Guide to the Markets illustrates that remaining invested for the long term can help investors limit extreme volatility. For example, staying the course for five years reduces an all-stock investor’s average downside loss from -37% to -2%—a remarkable 35 percentage point swing.

Source: JP Morgan’s Quarterly Guide to the Markets dtd 09/30/2024

• Long-term investors are typically rewarded by sticking to their strategy and continuing to invest during market volatility. Research from Hartford Funds shows that between 1994 and 2023, half of the S&P 500’s top 50 single-day returns occurred during a bear market. Another 28% occurred in the first two months of a bull market—a period often filled with negative headlines. In total, 78% of the market’s best days happened during times of uncertainty, meaning that missing just a few of those key days could significantly impact your portfolio’s long-term growth.

For example, making a $10,000 investment in 1994, and letting it grow until 2023, would result in an account value of over $181,000. However, if the investor missed just 10 of the best single-day returns, that same $10,000 would have grown to only $83,000—a reduction of 54%!

How We’re Navigating the Uncertainty Together

As your financial advisors, our role is to help you stay focused on your long-term goals, especially during times of market turbulence. While we monitor potential changes to tax policies, retirement benefits, and other financial regulations that could emerge after the election, the cornerstone of your financial success remains the same: thoughtful, proactive planning.

If you have concerns about how the election might impact your portfolio or want to discuss potential opportunities to adjust your strategy, please feel free to reach out for a conversation.

Advisors Capital Management, LLC is an investment advisor registered with the United States Securities and Exchange Commission. Registration does not imply any degree of skill or training. All investing carries risk, including the potential for the loss of principal and past performance is no guarantee of future results. This content is for informational purposes only, can change at any time without notice, and is not investment advice or a recommendation to trade any security. Indices are not available for direct investment. We only provide services in jurisdictions where we are registered. Our disclosure brochure (ADV Part 2A) and customer relationship summary (ADV Part 3) are available at https://adviserinfo.sec.gov and upon request.