As the 2024 election looms, the future feels uncertain—but your financial mission doesn’t have to be. While election years often bring a wave of market anxiety, the key to navigating this turbulence is understanding how to stay focused on your long-term goals.

Elections can stir market volatility and investor sentiment, often leading to reactive and emotional decision-making. Understanding that, historically speaking, the political party in power does not significantly alter market performance may help you stay grounded in your long-term strategy.

Below, we’re focusing on how investors like you can stay true to your financial mission by focusing on behavior rather than political outcomes, especially as the uncertainty of a presidential election comes closer.

The Historical Impact of Elections on the Market

The stock market is affected by various factors, from natural disasters to geopolitical conflict, changes in power (like presidential elections), corporate scandals, economic data reports, and more. It’s important to remember that one singular event (such as the upcoming presidential election) does not typically leave a lasting impact on the markets.

It would be inaccurate to say that the markets move up or down based on which political party is in power. If there is any volatility, history tells us it will be short-lived—after all, the markets have consistently trended upward over time.

Will there be market volatility coinciding with the election?

It’s possible—but it has less to do with corporate earnings or market performance and more with investor behavior. Investors don’t like change, and an election brings the possibility of change. Remember that during presidential elections, we may also see a change in who controls the Senate and House of Representatives—which can play a significant role in both the President’s and Congress’s ability to pass future legislation.

This election, in particular, is more uncertain than in years past. An unprecedented change in candidates and an assassination attempt have brought more global media attention to this upcoming election than we’ve seen before, meaning all eyes around the world are watching for the outcome. 

Staying Grounded in Your Financial Mission

If you’re concerned about how the upcoming election may impact your portfolio, here are a few things you can do to ignore the short-term market movements and stay focused on your financial mission.

Revisit your financial mission statement: Every decision you make regarding spending, saving, and investing should align with your financial mission statement. If you don’t have one, take some time now before the election to sit down and create a concise, two- to three-sentence statement that summarizes your values, priorities, and long-term goals. Staying true to your mission statement will make it easier to avoid being swayed by changes in the political climate.

Avoid emotional decision-making: You owe it to your future self to leave your emotions out of the equation when making decisions about your portfolio and investments. This can be especially hard depending on which political party takes control and how that aligns with your personal beliefs. Election-related news and small, temporary market fluctuations can be challenging, but it’s important to remember that these are temporary. 

Maintain patience and perspective: Time in the markets matters—no matter which party controls this upcoming election. Your behavior, not the political climate, is the most significant determinant of your investment success. Be patient, avoid the noise, and keep a long-term perspective on what matters most (creating financial stability, saving for retirement, paying for college, or whatever else you’re working toward).

Practical Strategies for Navigating Election Uncertainty

After understanding why it’s important to maintain a long-term focus, let’s shift gears to review the strategies you may want to consider when preparing your portfolio for election season and beyond.

Diversification is one of the most fundamental and well-known investment strategies used today—and it’s likely something you’re already doing. Diversification refers to spreading your capital among different asset types, countries of origin, risk levels, sectors, etc. Doing so ensures you aren’t putting all your eggs in one basket (imagine a company you’re too concentrated in goes belly-up one day, demolishing your portfolio’s value in its wake). 

Asset Allocation refers to how your portfolio is divided among different asset types—stocks, bonds or fixed income, and cash or cash equivalents. Different assets have different characteristics and risk levels, which work together to help you achieve an ideal balance between growth potential and capital preservation.

Though you may be using a “buy and hold” or passive investment strategy, it’s still important to periodically review your portfolio to ensure your current portfolio aligns with your long-term goals.

You may find it necessary to rebalance the portfolio if some assets (like stocks) start to exceed their intended percentage or if certain stocks aren’t meeting expectations. It’s important to note here that rebalancing your portfolio to ensure it aligns with your long-term investment strategy differs from making impulsive, reactive decisions based on short-term market movements.

Some people choose to maintain an emergency fund or cash reserves, particularly during election years. Doing so can help you avoid being put in a position where you’re forced to sell investments at a reasonable time due to market volatility.

Ready to Stay the Course this Election Season?

Consider speaking with a financial planner if you’re apprehensive about what’s to come. They can provide tailored guidance and reassurance during uncertain times (like presidential elections) while helping you stay focused on your financial mission. A planner also serves as an unbiased sounding board, and it can help you avoid making impulsive, short-sighted decisions.

The accurate measure of financial success lies not in the party in power but in your unwavering commitment to long-term goals. At Mission Street Wealth Planning, we’re here to support you every step of the way. Reach out to our team today to get started.