What Will the Election Do to the Market?
Whatever the outcome, stay calm. Corporate earnings, Fed policy and macroeconomic trends will likely hold sway.
Wall Street had a rather calm summer. Will volatility increase before and after Election Day?
So far, the market is performing roughly in line with historical patterns. In 19 of the prior 22 presidential election years, Standard & Poor's 500-stock index advanced from June through October. The median gain for the index during that five-month period: 4.1%.
During those 22 election years, the S&P averaged a gain of 1.5% in June, 1.9% in July and 3.0% in August. This year, the S&P rose 0.1% in June and rallied 3.6% in July. It was up ever so slightly for the month of August, a gain that represented its sixth straight monthly advance. Everything's good—so far.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In past election years, July and August have been the most volatile months. The yearly standard deviation for the S&P averaged 18.6% during the past 22 election years, but volatility averaged 28.8% in July and 30.3% in August of those 22 years. July and August were relatively calm this election year, but September not so much.
Whoever wins the election, the status quo will likely remain on Capitol Hill. As a Morgan Stanley report commented in July, "Current evidence suggests the U.S. elections in November won't yield outcomes that substantially change market fundamentals." Morgan Stanley analysts foresee Clinton winning the election and Republicans retaining their majority in the House of Representatives. In that scenario, Clinton wins, but her administration has difficulty enacting any of its planned reforms.
The Smart Money
If the Republicans lose control of the House, the Democrats win the Senate or Trump wins, Wall Street could see some pronounced short-term volatility, which is also an outcome that could possibly affect market fundamentals. Possibly. But frankly, none of the aforementioned outcomes is considered likely at this point by the general consensus also known as the market. Even if one candidate or the other wins by a landslide, their most ambitious proposals may never get off the ground. As Morgan Stanley asserts, "attempts by Clinton or Trump to exercise transformative power domestically will be stunted" by a lack of support in Congress.
Should stocks rollercoaster before or after Election Day, keep calm. Any disturbance may be short-term, and your investing and retirement saving effort is decidedly long-term. The election is a big event, but earnings, central bank monetary policy and macroeconomic factors may have a much bigger impact on the markets this fall.
Greg O'Donnell's mission over the course of three decades has been to guide people to pursue and maintain a healthy financial life plan that accomplishes their goals.
Investment advice offered through O'Donnell Financial Services, LLC, a Registered Investment Adviser. Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory assets may be custodied at TD Ameritrade. Insurance Services offered Gregory C. O'Donnell, CA Insurance #0B87978. Mortgage Services are provided through American Pacific Mortgage Corporation, licensed by the California Bureau of Real Estate #01215943, NMLS #1850. Gregory C. O'Donnell licensed by the California Bureau of Real Estate #00971579, NMLS #298004. O'Donnell Financial Group Inc. and O'Donnell Financial Services, LLC are not affiliated with Securities America, TD Ameritrade, or American Pacific Mortgage Corporation. Registered to offer securities in: AR, AZ, CA, FL, HI, MO, NC, NV, NY, OR, TN, TX and WA.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment<.
-
The Santa Claus Rally Officially Begins: Stock Market TodayThe Santa Claus Rally is officially on as of Wednesday's closing bell, and initial returns are positive.
-
How to Leave Different Amounts to Adult Children Without Causing a RiftHere’s how to leave different amounts to adult children without causing a family rift.
-
My Retirement Learning Curve, 1 Year InA retiree checks in with what they wish they knew early on and what they've changed about their plan one year in.
-
Introducing Your CD's Edgier Cousin: The Market-Linked CDTraditional CDs are a safe option for savers, but they don't always beat inflation. Should you try their counterparts, market-linked CDs, for better returns?
-
How to Protect Yourself and Others From a Troubled Adult Child: A Lesson from Real LifeThis case of a violent adult son whose parents are in denial is an example of the extreme risks some parents face if they neglect essential safety precautions.
-
To Build Client Relationships That Last, Embrace SimplicityAs more automation becomes the norm, you can distinguish yourself as a financial professional by using technology wisely and prioritizing personal touches.
-
Client Demand Is Forcing Financial Advisers to Specialize: How to DeliverThe complexity of wealthy clients' needs — combined with AI and consumer demand — suggests the future of financial planning belongs to specialized experts.
-
A Financial Planner Takes a Deep Dive Into How Charitable Trusts Benefit You and Your Favorite CharitiesThese dual-purpose tools let affluent families combine philanthropic goals with advanced tax planning to generate income, reduce estate taxes and preserve wealth.
-
A 5-Step Plan for Parents of Children With Special Needs, From a Financial PlannerGuidance to help ensure your child's needs are supported now and in the future – while protecting your own financial well-being.
-
How Financial Advisers Can Best Help Widowed and Divorced WomenApproaching conversations with empathy and compassion is key to helping them find clarity and confidence and take control of their financial futures.
-
A Wealth Adviser Explains: 4 Times I'd Give the Green Light for a Roth Conversion (and 4 Times I'd Say It's a No-Go)Roth conversions should never be done on a whim — they're a product of careful timing and long-term tax considerations. So how can you tell whether to go ahead?
