Elections & Your Portfolio: What You Need to Know
U.S. elections create short-term volatility — but history shows that markets adapt to them quickly.
The U.S. elections have been in every conversation lately, and they are creating uncertainty for many investors. But concretely, what does that mean for your portfolio?
The impact of elections on the market
Historically, U.S. elections create short-term volatility, but this instability is often short-lived. For example, after the 2016 election, although the results surprised the market, it quickly rebounded on the anticipation of business-friendly policies.
In 2020, despite a tense climate and a pandemic, markets posted strong returns after the election, fuelled by expectations of an economic recovery.
What really matters: The long term
It is easy to get carried away by worries and want to react to political changes. However, history shows us that the party in power has little long-term impact on market performance. What truly influences long-term returns are economic factors such as interest rates, corporate earnings and global economic trends — not the government in place.
The chart below illustrates this trend well: regardless of the party in power (Democratic or Republican), stocks have historically risen over the long term. A hypothetical investment of $1,000 in the S&P 500 index in 1933 would have reached approximately $21.5 million in 2023.
How to navigate this period of uncertainty
The key is to stay the course. Rather than reacting to political changes, a well-structured, diversified investment plan remains your best ally for navigating the market’s ups and downs. By staying true to a long-term investment strategy, you can benefit from the economic fundamentals that support the markets.
In summary
Yes, elections can bring some volatility, but economic fundamentals and a disciplined approach are far more influential over the long term. If you have questions about your portfolio or would like to discuss it, don’t hesitate to book an appointment.
Why do markets react so much to elections?
It is not so much the elections themselves that unsettle markets as the uncertainty surrounding them. As long as the outcome is unknown, it is hard for investors to assess future policies, and that ambiguity can translate into more pronounced short-term price swings.
Once the result is announced, attention generally returns to what really matters: corporate earnings, interest rates and the health of the economy. It is also worth remembering that not every campaign promise becomes actual policy — the road from campaign trail to implementation is often long and softened by compromise.
Reflexes to avoid during election season
In times of uncertainty, some very human reflexes can hurt your long-term plan:
- Getting out of the market “until things become clearer”: historically, rebounds often come without warning, and being out of the market at those moments can be costly over the long run.
- Investing based on your political convictions rather than your financial plan.
- Reacting to headlines rather than economic fundamentals.
- Losing sight of your investment horizon, which extends well beyond a four-year election cycle.
What you can control
You cannot control the outcome of an election, but you can control how well your portfolio is prepared for it. Proper diversification, periodic rebalancing and regular contributions remain simple, effective tools for getting through periods of volatility.
Above all, make sure your strategy stays aligned with your goals and your risk tolerance, not with the news cycle. The value of investments can fluctuate, but a well-built plan is designed precisely to weather those fluctuations.
If political headlines are making you second-guess your strategy, it may be the right time to talk it through. Contact the Pérennité team — we can review your plan together, calmly and without pressure.
