Election passed, shares move on

On November 6, 2024By Littum

Investors spent most of 2024 shrugging off macro geopolitical fears — energy, climate change, conflicts in Ukraine and the Middle East — that could have potentially disrupted market returns. Instead, the narratives driving the markets have been much more focused on artificial intelligence, robust growth and lower interest rates, with seemingly little concern about who is in the White House.

From market close on election day S&P 500 increased 21.93% and Nasdaq up 24.88% for the year, far better than the nearly 5% year-to-date performance in the average presidential election year going back to 1950. In fact, 2024 has been the best 10-month run for US stocks in any election year since 1936.

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But political concerns seemed inevitably more pressing as we awaited the final verdict on who would become the 47th US president.

Here’s the real truth: To invest, it doesn’t mean much.

Through COVID-19, Brexit, the Great Recession, 9/11, Black Monday, record inflation, Watergate, Vietnam and dozens of US presidents…

The shares have gradually moved up and to the right. Over time, the real winner is the long-term investor.

I find the visual of long-term investment returns reassuring during stressful times in the market. See this one covering the past 50 years (the gray bars indicate recessions):

Basically, over the last five decades, investments – regardless of the starting point – have paid off. Maybe not always over a year. Or two. Maybe three. But over five and 10 years and longer, being a buyer and holder of US stocks has worked very well.

And despite the anxiety, the market’s returns apparently didn’t care who sat in the Oval Office. Seam The Financial Times shared this week, the S&P 500 delivered 10%-plus annual total return (the long-term investment average) in every presidency (except one) since Jimmy Carter.

And along the way only one period (after George W. Bush’s first election in 2000, during the collapse of the tech bubble) stocks ended up lower 12 months after an election.

This does not mean that we will not experience increased volatility now that we have finished submitting our ballots. There are plenty of business factors that will affect stocks through 2024 and beyond. And for any individual business, a president’s actions can have an impact.

That said, there’s other DC news this week: The Federal Reserve will announce its latest interest rate policy Thursday. After a rate cut of 50 basis points in September, the Fed is expected to lower its prime lending rate by another 25 basis points. What happens inside the Fed offices on Constitution Avenue is likely to have a far greater effect on investment returns than who ends up living on Pennsylvania Avenue.

So in this and all interesting times, remember ours Varied fool key investment principles:

Be a buyer and owner of businesses, not tickers.
Invest capital in stocks that you will not need within the next three years.
Embrace a long-term, patient investment perspective.
Owns at least 25 shares.
Keep on average for five plus years.
Use ETFs to help you diversify.
Save and invest, rinse and repeat.
And most importantly, stay in the game.

The President of the United States is the CEO of the biggest, most important, strongest country in the world.

But the truth is, for stock investors like us, who we call our Commander-in-Chief is not the most important factor in our investment success. It’s probably not even in the top 25.

So we urge you to maintain the long-term, foolish investment mindset that so many of you have already adopted. Separate the signal from the noise. Stay invested. Take advantage of market volatility by looking for buying opportunities.

And if you start to feel anxious or unsure, just remember the chart above.

Stocks move up and to the right.

I wish you the best of investing success through all political cycles.

be stupid
Andy Cross
Chief Investment Officer, The Motley Fool

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Andy Cross has no position in any of the shares mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.

The election passed, shares move on was originally published by The Motley Fool