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.
Sign up for Kiplinger’s Free E-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<.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
-
The Home Stretch: Seven Essential Steps for Pre-RetireesThe decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
-
Three Options for Retirees With Concentrated Stock PositionsIf a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
-
Four Reasons It May Be Time to Shop for New InsuranceYou may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
