A big focus of the presidential campaign has been on which candidate would be best for the American economy. And with Election Day now just around the corner, many investors are wondering how the results will affect their portfolio.
But while there are many reasons to change your investing strategy, the presidential election is simply not one of them.
Research from financial services giant Fidelity shows that since 1960, the stock market has an average annual return of about 12% in aggregate. Under a Democratic president the average return is 12.2% and under a Republican it's11.8%.
If you want to pick an arbitrary reason to change your strategy, however, Fidelity actually found that investing in odd-numbered years returned an average of 16.2%, while investing in even years returned 7.7% on average since 1960 — so hey, why not let it ride in 2017 regardless of the winning party?
On the other hand, separate research from Bank of America/Merrill Lynch showed that since 1928 the S&P 500 has dropped by 2.8% in years we don’t have an incumbent running for president, and has averaged 12.6% gains in years a sitting president is up for re-election. So, maybe wait four years either way?
In all seriousness, it’s not that presidents and political parties don’t matter. It’s that “there are a lot of factors that matter more,” said John Sweeney, executive vice president of retirement and investing strategies at Fidelity.
“It’s the economic cycle, it’s job growth, it’s technology advances,” he said. “Those drivers tend to be much more impactful on the performance of the stock market than who’s running the government.”
That’s hard for many Americans to believe, however. A recent survey by Fidelity found that 74% of investors think the party in control of the White House or Congress has a significant impact on the stock market — and furthermore, 15% of those surveyed are making changes to their investments because of the election.
But as with so many things this election cycle, just because you have strong feelings on a topic, that doesn’t mean facts are on your side. Countless research shows that being patient with your portfolio is better for your financial well-being, and this year is no different.
“We have presidential elections every four years and congressional elections every two years,” Sweeney said. “Step back and take a longer-term view.”