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Patience During an Election Year

Patience During an Election Year

June 09, 2020
Many of us are familiar with the phrase "Patience is a virtue". While we may be familiar with it, that does not mean it is easy to practice, especially in a society where we expect instant gratification. In the world of streaming, Prime, DoorDash, and Instacart, we have become accustom to receiving a return on either our time or our money spent, nearly instantaneously.
When it comes to investing, patience is a key ingredient to long-term success, as the market can, and often does experience periods of volatility. This has been the experience of many investors so far in 2020 as the economic impact of the coronavirus sent global stock markets tumbling downward. More recently, the global equity markets have experienced a significant bounce off the bottom, and the question has turned to when and how will the economy open and recover. While coronavirus has captured much of our attention currently, in about 5 months voters will be headed to the polls to participate in our next presidential election.
So just what have the markets done historically during a presidential election year? The chart below from a recent article done by Capital Group shows that since 1932, the S&P 500 has experienced downward volatility during the run-up to the primaries, and on average has posted a negative return. However, in the 12 months after the primaries are over, the average return experienced by the S&P500 is over 10%, compared to 5.8% for years without an election. Notice also the dot on the bottom of the chart the indicates Election Day. From that period through May of the following year, the S&P 500 has on average also experienced positive returns, regardless of who is elected president.
As we move closer to election day, and the world continues to navigate the uncertainties driven by the coronavirus, please remember that patience and time in the market, rather than attempting to time the market, is a vital component to the successful growth of an investment portfolio. If you have any questions, as always please feel free to reach out to our office as we continue "Moving Life Forward" together.