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Is Right Before an Election a Good Time to Invest in the Stock Market?

by BlogInvestment Portfolio

Investing in the stock market right before an election can be a double-edged sword, with both potential benefits and risks. Here are key points to consider based on historical trends and expert insights:

Potential Benefits:

  1. Market Anticipation: Historically, markets often rally before an election, driven by optimism about potential outcomes. For example, following the 2016 presidential election, the stock market experienced a significant surge, reflecting investor confidence in the new administration’s pro-business policiesion Rebound**: After elections, once uncertainty is removed, markets can stabilize and even rise. The 2020 election saw a strong rebound in the stock market after Joe Biden was confirmed as the winner, driven by hopes for economic recovery and vaccine announcements.
  2. Unpredictable Outcomes: are unexpected, it can lead to significant market declines. The emotional reaction of investors to surprising outcomes can exacerbate volatility.
  3. Economic Factors: Broader economic conditions, inflation rates and interest rates, can overshadow the impact of elections on the stock market. If economic indicators are weak, they may influence market performance more than the election results.

 

Here’s a look at what happened to the U.S. stock market after the last five presidential elections:

2020 Election (Biden vs. Trump):

  • Result: Joe Biden won.
  • Market Reaction: Initially volatile, the market recovered and surged after election results were confirmed, fueled by optimism around a COVID-19 vaccine and the expectation of stability under a Biden administration. The S&P 500 gained about 7% in November 2020. The market was buoyed by hopes of economic recovery, a stable transition, and stimulus measures​.
    • The Dow Jones reached 30,000 for the first time.
    • Technology stocks, which had benefited from pandemic conditions, continued to perform well.

2016 Election (Trump vs. Clinton):

  • Result: Donald Trump won.
  • Market Reaction: After Trump’s unexpected win, the Dow Jones futures initially plummeted, but the market quickly rebounded. The S&P 500 rose by 5% in the month following the election. Investors anticipated tax cuts, deregulation, and infrastructure spending under Trump’s administration, leading to a surge in industrial, financial, and energy stocks​.

2012 Election (Obama vs. Romney):

  • Result: Barack Obama was re-elected.
  • Market Reaction: The stock market initially reacted negatively. The S&P 500 dropped by nearly 2.4% the day after Obama’s re-election, primarily due to concerns about the looming “fiscal cliff” (a combination of tax hikes and spending cuts). Markets remained volatile until a compromise was reached in late December​.

2008 Election (Obama vs. McCain):

  • Result: Barack Obama won.
  • Market Reaction: Obama was elected during the global financial crisis, and the stock market continued its decline. The S&P 500 fell about 5% in the two days following the election due to the ongoing economic downturn. However, as Obama’s stimulus plan was announced, the market began to recover. By March 2009, the stock market began its longest bull run in history, which continued through much of Obama’s presidency​.

2004 Election (Bush vs. Kerry):

  • Result: George W. Bush was re-elected.
  • Market Reaction: After Bush’s re-election, the market reacted positively, with the S&P 500 rising about 1.1% the day after the election. Investors were optimistic about continuity in economic policy and tax cuts that were beneficial to corporations. Over the following months, the market continued to climb.

Conclusion:

While investing right before an election may have opportunities for gains, it also carries significant risks due to market volatility and uncertainty. For long-term investors, focusing on a diversified portfolio and sticking to fundamental investment strategies is often a safer approach than trying to time the market based on political events.

To learn about Women and Investing, download our Women and Investing guide here.

For help with your investment portfolio, reach out to retire@herretirement.com. We can connect you with investing professionals.

This information has been provided for informational purposes only. Investing in the stock market involves risks, including the potential loss of principal. Market fluctuations can lead to unpredictable returns, and there is no guarantee of future performance. It’s important to conduct thorough research or consult with a financial advisor before making investment decisions. Past performance is not indicative of future results, and individual circumstances may vary.

For more detailed insights on investment risks, you can refer to the following sources:

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When it Comes to Having an Investment Advisor…is Nice, Enough?

by BlogRetirement AdvisorRetirement EducationRetirement IncomeRetirement Income PlanningRetirement Savings

Recently I had a Get Her Done Chat with a lovely lady named Susan who’s turning 60 soon. She’s starting to think seriously about retirement (because she’s been watching me and all my tips on YouTube and TikTok).

She has $500,000 managed by one of the big investment firms and she’s paying a 1.5% management fee. That’s $7,500 per annum or $625/month. Not an insignificant amount. However, fees are an issue in the absence of value.

I asked her what services the advisor is providing (i.e. value)? Other than meeting once a year to review her portfolio and making some adjustments, she really couldn’t come up with any other value.

She also admitted she doesn’t really understand what the firm/advisor is doing with her money, or why. She did say the advisor, who she’s had for several years, is likable and nice.

But….when it comes to your money and retirement, is nice enough?

We talked a bit more, and it became clear the nice advisor has never had the proper money and retirement conversation (nor provided any education). A conversation and education that my new friend Susan really needs (and deserves), by the way.

Me: “So has your advisor brought up (and educated you about)…

  • Retirement risks and how to mitigate them? Longevity, volatility, sequence of return, inflation, interest rates, etc.?
  • Optimized retirement portfolios?
  • Retirement income planning (generating protected income for life)?
  • Social Security timing & maximization?
  • Healthcare planning?
  • Long-term care planning?
  • Life insurance planning?
  • Tax planning for retirement?
  • Using home equity as an income buffer?
  • Estate planning?
  • Non-financial topics such as: lifestyle planning (where you’ll live, what you’ll do, purpose, mental and physical health, social connections, etc.)?

Susan: “Nope. Nada. Just my investments. I did ask him about Social Security and he said I can take it whenever I feel like it (me: ugh). I also asked him about annuities and he said, “Run. If anyone ever brings up annuities to you, run away from that advisor.”  (me: ugh again)

Before I could respond, Susan added, “I don’t even know when I can retire or how much money I can take from my 401k or when? Or if, god forbid, I run out of money and become a bag lady. I’m just feeling a little panicked and the thought of not having a regular paycheck from working is frightening.”

Wow…so much to unpack from her response. It was crystal clear that Susan’s nice advisor was clueless about retirement planning. As I explained to Susan, “There’s many, many investment-only advisors. This doesn’t make him bad at his job. I’m not here to judge that. It just makes him inappropriate for the “retirement planning” job you need done now. And, for an equal to or potentially lower fee than what you’re currently paying, you could be benefiting from FULL retirement planning vs. just investment advice.”

Susan decided to schedule another chat with me to dig into her details (yay). I encouraged her to take my free Her Retirement Masterclass and to check out a preview of my retirement readiness software platform before our next chat.

I explained that getting foundational retirement literacy is a key part of the Her Retirement process. This will allow her to have more informed conversations with retirement experts and make more informed decisions. She’ll also be taking a complete financial inventory within my software and will benefit from a personalized G.R.O.W. guide the software produces for her. The guide will identify her Gaps, Risks and Opportunities, which is a foundational element to her ultimate retirement plan.

I’m looking forward to being an active listener and collaborator with Susan on her journey to “more.”

Unfortunately, there’s many conversations going on across the country that are similar to Susan’s with her investment advisor. Approximately 5,200 women are turning 60 every day in the United States.  It scares me to think of the lost opportunity many women will have to improve their retirement outcome, simply because they aren’t getting the quality advice and education around retirement they deserve. Sometimes, it’s simply because they don’t know what they don’t know. They don’t know who to turn to and who to trust.

In addition, as the Great Wealth Transfer unfolds over the next decade, women will become increasingly vulnerable as they inherit significant wealth. This demographic shift, which will see trillions of dollars transferred from the older generation to their heirs, places women at a unique risk. Many women, especially those who may not have been the primary financial decision-makers in their households, could find themselves navigating unfamiliar financial terrain. This vulnerability is exacerbated by the potential influx of unscrupulous advisors looking to exploit their lack of financial literacy or experience. These predatory advisors may offer seemingly attractive financial products or services with hidden fees, poor returns, or outright fraud. It is crucial for women to seek out trustworthy, transparent, and knowledgeable financial/retirement advisors to safeguard their newfound wealth and ensure their financial security for the future.

My mission with Her Retirement is to encourage more women to become students and stewards of their life and retirement. With my “More for Her Movement,” I want all women to Know More. Have More & Live More (now and in retirement).

I also connect women with professionals who are nice AND knowledgeable about all this retirement planning stuff…while also providing A LOT more value than the average Joe investment advisor. If you’re a single or suddenly single professional woman who wants more, I can help you Get Her Done.  Reach out because no, nice is not enough.