Now that Democrats are in power, many investors are concerned about how the market may respond to the potential for increased taxes and regulations.
Some investors may change their strategy based on potential outcomes, but that may not be wise.
Since 1933, stock markets have increased irrespective of which political party was in the White House. With respect to Congress, the markets have performed similarly with both a split Congress, and a unified government, where Congress and the White House are of the same party.
And since 1945, both Republicans and Democrats have experienced positive market returns during their tenure. This data demonstrates that there is no clear correlation between political party in power and stock market performance. However, there is very strong correlation between investor decisions and their personal rate of return.
Over the past 20 years, the average investor has earned 2.5% annual returns, just barely beating out inflation. This is because investors often buy securities after they go up in value and sell them after they go down.
Given that investor performance is more influenced by our own decisions (in our control) than which political party is in power (outside our control), it would be wise to spend our time and attention ensuring we make wise decisions.
How will you respond to the next market sell-off? What will you do when you see other investments performing better than yours? How will you remain disciplined to your plan?
Those are all valid questions, and I am here to help you devise the right plan for you.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Information obtained from Capital Group. What the U.S. election means for investors. Nov 4, 2020. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly. Past performance is not indicative of future results.
©2021 The Behavioral Finance Network. Used with permission.