Presidential Elections and the Stock Market

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This November, Americans will be heading to the polls to elect the next president of the United States. It is shaping up to be a very close race between Donald Trump and Hillary Clinton, two candidates with very different visions for the country overall. The outcome of this presidential election may have an impact on taxes and health care. Is there a way to election-proof your portfolio?

This Issue Brief provided by Dimensional Fund Advisors discusses the importance of avoiding significant changes in your long-term investment plan based on opinions from market prognosticators.

Making investment decisions based on the possible outcome of a presidential election is “unlikely to result in reliable excess returns for investors. At best, any positive outcome will likely be the result of random luck. At worst, it can lead to costly mistakes.”
The image below shows the growth of one dollar invested in the S&P 500 Index over nine decades and 15 presidencies (from Coolidge to Obama.)

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The key takeaway here is that over the long run, the market has provided substantial returns regardless of who controlled the executive branch. Remember that there are larger forces that hold tremendous potential for markets and investors in the coming years. Big data, cloud computing, and cybersecurity continue to change the world. The Baby Boomer generation has created demand in sectors such as health care, leisure and hospitality. These underpinnings of the economy will continue to generate returns, irrespective of who is in the Oval Office.


About Christopher Jones

Christopher Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management.

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