We crave certainty. In a world where everything from the price of eggs to the temperature of oceans feels volatile, the idea that a single election can hold sway over the market seems almost comforting. It’s a clean, digestible narrative: “Elect this person, and stocks will rise. Elect the other, and watch your investments crumble.” This yearning for cause and effect runs deep, but like many narratives we cling to in uncertain times, it’s far too simplistic.
After all, history has no interest in adhering to our stories. It spins on its own axis, indifferent to the plots we write in our heads. And the market? It’s a beast all its own, responding to a web of forces so intricate and organic that pinning its movements to one event—or one person—is like trying to predict the tides by watching a single wave.
Yet, during election years, it’s natural for investors to feel as though they’re standing at the edge of some impending financial abyss or paradise, depending on their political leanings. The campaign rhetoric amplifies this sense of urgency, as candidates push narratives of economic doom or prosperity based on whether they win or lose. But a glance back in time tells a different story. First, remember that the economy and stock market don’t always (or often) move in sync. The stock market has risen under both Democrats and Republicans. It has fallen under both, too. If we zoom out enough, we see the futility in drawing a straight line between who occupies the White House and the market’s behavior.
Let’s take the 2020 election as an example. The world was reeling from a global pandemic, and the political landscape was divisive, to say the least. Many speculated that the outcome of the election would cause seismic shifts in the market. But what happened? The market did what it does—it reacted to the pandemic, stimulus packages, interest rates, technological advancements, and a myriad of other factors. The president was but one chapter in a much longer book.
The truth is, there are far more impactful drivers of market performance than who sits in the Oval Office. Global economic trends, corporate earnings, interest rates, inflation, and technological innovation—all of these weigh more heavily on market returns than election results. The market has seen periods of expansion and contraction, bull runs and bear crashes, under every president. Some of the best market years occurred under leaders many believed would spell economic disaster, and vice versa.
So why, then, do we continue to fixate on elections as market predictors? It might be that elections feel tangible—something we can point to, something that feels within our grasp. But just as life is more than the sum of its headlines, the market is more than the result of a single election. The relationship between elections and the market is not a clear, predictive one; it’s just another piece of a much larger, more complex puzzle.
For investors, this means one thing: stick to your plan. Resist the temptation to let short-term noise—be it an election or anything else—derail your long-term strategy. Elections will come and go. Presidents will serve their terms. But the market, with all its unpredictability, marches on.
At The Humphreys Group, we understand that the intersection of politics and the market can be as bewildering as it is compelling. If you’re seeking clarity and a strategic approach to your investments amidst the ebb and flow of election cycles, we’re here to help. Whether you’re looking to refine your investment strategy, discuss the impact of current events, or simply gain a deeper understanding of how to navigate market uncertainties, our team is ready to guide you with expertise and insight. Contact us today to start the conversation.
