The U.S. Presidential election is a little more than three months away. The campaign will be vigorously contested by both parties, with emotions running high and possibly greater than normal market volatility, including after the election depending on its outcome. Political candidates typically campaign from extreme positions to inspire their supporters and encourage voter turnout, but most politicians tend to govern from the center over time, simply because that is how they remain in office.
For example, both parties have proposed various changes to tax and spending policies. While those may sound appealing to one segment or another of the voting public, what actually gets passed will undoubtedly look very different. Both parties have strong incentives to have a sound economy and stable financial markets. Whatever laws they pass will be designed to achieve those objectives.
In our experience, a person’s outlook on the economy and the stock market frequently depends on whether their candidate gets elected or not, or whether their favored party is in power. History shows the stock market is usually indifferent to who is President. A stock rises and falls based on a company’s revenue and earnings performance. Businesses work to maximize their earnings in whatever tax and regulatory environment exists at the time. There is no question that government policies and regulations can help or hurt certain industries within an economy, but companies will adapt to changes in rules, as they always have.
There is no need to change your long-term investment strategy based on who may or may not be our next President. There is no preferred politics for the stock market. Stocks have historically done well under both political parties. None of us are investing for the next one to four calendar quarters. We are long term, goal-focused, planning-driven, disciplined investors. If your goals have not changed, there is no reason to change your investment plan.