Financial Planning Fridays #122: Politics and Your Investments
With a new presidential term beginning, this Presilium video examines how the S&P 500 has performed across past administrations and why long-term investors generally should not overhaul their strategy based on election outcomes. It encourages staying focused on the financial plan rather than the political cycle.
With a new presidential term beginning, this Presilium video examines how the S&P 500 has performed across past administrations and why long-term investors generally should not overhaul their strategy based on election outcomes. It encourages staying focused on the financial plan rather than the political cycle.
Key takeaways
- Markets have historically advanced under both political parties, so elections rarely justify major strategy changes.
- Reacting to politics by moving in and out of the market risks costly timing mistakes.
- A long-term financial plan is designed to work across administrations and policy environments.
- Historical return data across presidencies provides context, not a prediction of future performance.
Hi Friends, Donald Trump will be sworn in as the 47th U.S. president later this month. Should you change your investment strategy in any way? Let’s look at how the market has performed during previous presidential terms and discuss our plan for the next 4 years. Let’s look at this year first. This chart from First Trust shows the return of the S&P 500 the first year of a new president going back to 1928. When a Republican is elected, their first year has had an average return of 15.3%. The only negative example in the past 100 years was George W. Bush’s first year as President when the market fell 9.1%. Changing your investment strategy because of politics has not worked out well. This great chart from Investopedia shows that the S&P 500 has been positive 83% of Presidential terms going back to Eisenhower. The average return during each term has been 40.6% and the median return has been 46.2%. We recall hearing about people exiting the stock market when Trump won his first term in 2016 and then again when Biden won in 2020. They missed out on a 69%+ return under Trump and then more than 48% under President Biden. This chart from Capital Group shows the longer-term bottom line. The market has gone up regardless of who was in the White House. As you can see, $1,000 has grown to more than $24 Million from 1933-2023. The key has been to have an investment strategy you feel confident in and then sticking with it no matter the current political situation for the long term. At Presilium, we will not let politics affect our investment policy. Instead, we remain ready to take advantage of the inevitable temporary market declines that come during every Presidential term because we remain optimistic that the market will continue to move up like it always has in the past. Thank you and we look forward to talking with you next Friday. Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.
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