Market Volatility in an Election Year


About the Author

adam phillips

Adam Phillips, CFA, CAIA, CFP®

Managing Director, Investments
Torrance, California

As the 2024 election approaches, investors are bracing for market volatility. EP Wealth's Adam Phillips shares insights on navigating uncertainty and focusing on long-term goals during this turbulent time.

Market volatility in an election year

As we approach the 2024 presidential election, a question on the minds of many investors is how the stock market will react to the uncertainty and potential policy changes that come with a new administration. It's common to see increased market volatility in the months leading up to an election, but this year presents a unique situation. For the first time since 1912, we have two presidents squaring off against each other, making it a known matchup without much in the way of a learning curve for investors.

It's true that the election will undoubtedly play a role in market behavior, but it's important to remember that many other factors are at play. The state of the economy, the Federal Reserve's actions, and the outlook for policy interest rates are all likely to have a more significant impact on the market in the near term. However, as the election draws closer, you can expect it to become a larger factor in stock market performance.

Election Polls Don't Provide answers to market questions

Rather than trying to predict the outcome of the election, I believe it's more informative to look at potential winners and losers in the market based on different election scenarios. For example, if President Biden were to be reelected, renewable energy companies might benefit from continued support for green initiatives.

On the other hand, a Trump presidency could be favorable for the traditional energy sector and financial institutions, as the Republican party has historically been more friendly towards these industries. By monitoring the performance of these sectors, we may gain insight into what investors believe the election outcome might be.

It can be tempting to make significant changes to your portfolio based on election polls or speculation, but it's best to avoid making major adjustments until the election occurs and we have clarity on the outcome. Keep in mind that stocks are forward-looking, so if there is an expectation of future policy changes, prices will likely move in advance. However, with the likelihood of a divided government, major policy shifts are less probable.

As always, our focus at EP Wealth remains on making investment decisions based on data and information. While it's crucial to understand the potential impact of the election on various sectors, we recommend waiting until there is greater clarity before making substantial changes to your portfolio. In the meantime, we will continue to monitor economic indicators, Federal Reserve actions, and other key factors that drive market performance.

It's about your long-term investment goals

It's also important to consider the potential for short-term volatility versus long-term investment goals. While the election may create some temporary market fluctuations, it's essential to maintain a well-diversified portfolio that aligns with your risk tolerance and time horizon. Making knee-jerk reactions based on election speculation can lead to missed opportunities or unnecessary losses.

Rest assured that EP Wealth is committed to helping our clients navigate any market volatility that may arise during this election season. We will keep you informed of any significant developments and provide guidance to help you make informed decisions about your investments. Our team of experienced professionals are dedicated to helping you achieve your financial goals, regardless of the political climate.

If you have any questions or concerns about how the upcoming election may impact your portfolio, please don't hesitate to reach out to your financial advisor. We’re here to provide personalized advice and support to help you weather market uncertainties and stay on track towards your long-term financial objectives.



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