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“Will the elections have an impact on the stock market?”

This week, politics will be dominating the headlines, and without a doubt, I guarantee you will be reading a headline over the next day or two prophesizing stock market doom should a certain scenario occur. Today’s question is on just that concern.

Today’s Question is:

“Will the elections have an impact on the stock market?”.

Transcript - The Election’s Effect on the Stock Market

Before we look at specific numbers, Its important to remember what investing really is. You are making a bet that businesses will continue to produce returns into the future. A good business will operate under our country run by a democrat or a republican. Will people stop buying iPhones depending on whether the democrats gain control of the Senate? I doubt it. A broad basket of US stocks, such as an index fund, will very likely continue to produce acceptable long term returns for investors. 

But, this is not just canned advice. There is some history that backs up staying invested during election years too. Forbes was out with an article this weekend that looked back at the stock market performance in every midterm election since world war 2. There findings?

After every single mid term election since 1946 - the stock market was higher 12 months later.

If you bought a broad based US stock market fund the day before election day. You would have never been down a year later.

Those history buffs or those who have been around long enough to remember know that there have been many different scenarios over the last 70 years. There have been Republican presidents with democrats controlling the house or senate. There have been huge waves that cause a large number of incumbents to be removed from office. There have been years where there has been little change.

And in every single case the stock market has been higher a year later.

So whether the election effects the stock market is really unimportant. It might, it might not. No one really knows. But what is important is that you don’t make changes to your investment plan because of the election.


The Forbes article referenced can be read here: https://www.forbes.com/sites/stephenmcbride1/2018/11/02/ive-studied-stocks-after-every-midterm-election-since-world-war-ii-what-i-found-will-shock-you/#38c129853c20 

Matt Hylland