Elections can have a significant impact on markets, with President Joe Biden’s decision not to seek re-election adding to the complexity of managing investments in an election year. Tightly contested races for the presidency and both houses of Congress amplify already-elevated uncertainty about the outlook for markets. The following five tips may be helpful for investors seeking help in navigating election-year markets:
1. Cashing out of the market is usually a bad idea.
It can be tempting to sell stocks and move to the sidelines until election results are finalized. Historically, giving in to that temptation has been unwise. The S&P 500 has generated positive returns in 20 of the 24 election years since the beginning of the index. The four negative returning years had little to do with the election cycle. Three of the four negative election-year return periods (1932, 2000 and 2008) were during recessions; the fourth was during World War II (1940).
