In election season, stock market only cares about certainty

With summer officially coming to an end and school back in session, it’s hard to believe that we are about to enter the final quarter of 2023. With the year quickly passing us by, it has many focusing on what’s next. With a presidential election ahead of us, many of our clients have already begun asking for our thoughts regarding the stock market during this next election cycle.

Who you vote for and what party you support is your business. After all, it is what has kept this country a free and prospering place for hundreds of years. Most people are under the impression that the stock market will react poorly or positively to the running of a specific candidate. What history tells us is that the stock market doesn’t care so much about who is running. What it does care about is certainty.

It is not unusual in a race that feels tight or uncertain for the stock market performance to be flat or down. This is due to the ambiguity of what party and what policies will be put into place. It could lead to policy gridlock and a divided government, which ultimately causes confusion for investors when evaluating certain sectors or companies.

On the flip side, if the polls are showing a landslide outcome favoring one party over another, the market usually reacts positively because it can begin to predict which policies will become a focus in the near future, leaving investors with a cautious amount of optimism in companies that would benefit from those decisions.

It’s important to remain knowledgeable about what sectors are likely to be affected by upcoming policy change, but it is not anything to panic over. As always, investing is a big-picture scenario, and we must keep in mind that one full business cycle is usually longer than a four-year presidential term.

A diversified portfolio is the best way to ensure peace of mind during any year, but if you are an investor who is easily influenced by the noise of election years, it’s especially important to talk to your financial adviser about your concerns.

At CapWealth we are always working to ease our clients’ minds no matter what the news cycle brings, and we would be happy to do the same for you should you feel a sense of unrest in your investments as we head into the heat of the election.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com

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