4 Tips for Navigating the Markets During Election Season

We’re heading toward another contentious presidential election in the United States. If you’re on edge in this political climate, you’re not alone.

We don’t want your valid political qualms to lead you to make financial missteps. That’s why we’ve compiled four essential tips to help you maintain a level head and effectively manage your financial future in the face of political uncertainty.

1. Look at the History

Despite the month-long parade of anxiety-inducing headlines that typically precede a national election, recent history shows that elections rarely cause significant upset to financial markets.

In evaluating data from the past five presidential elections, short-term volatility does occur in the days and weeks immediately before and after the election. But those fluctuations fade quickly, and the market reverts to whatever trajectory it was already on.*

2. Enhance Your Media Literacy

In the coming months, headlines will likely try to tie every newsworthy event — big and small — into the 2024 election. While that will include financial news, it’s important to remember that small events typically don’t drive markets.

Instead, macro events move the needle. The subprime mortgage crisis sparked the Great Recession. A once-in-a-century pandemic set off economic upheaval in 2020. Be wary of headlines that try to convince you the economic world is falling off its axis because of an event that is ultimately micro in scale.

To navigate stories around the upcoming election it helps to increase your media literacy. Some sources cultivate panic or anger to drive more views, clicks, and revenue.

Use these tactics to evaluate the trustworthiness of a story:

• Scrutinize the source. Does the individual or organization have the credentials to speak on the topic?
• Question the melodrama. Is any emotion in the piece necessary, or is it a tactic to elicit a specific response or manipulate the reader?
• Examine the tone. Look for words that are designed to provoke emotional reactions.
• Consider the motive. Is the information neutral and purely informative, or is there a self-serving angle to the piece?
• Check the facts. Is the piece based on facts or opinions? If information is being presented as factual, can you independently verify it with a reputable third party?

3. Keep Calm and Invest On

Advisors preach this all the time, but it bears repeating during a stressful news cycle: Staying invested is one of the most beneficial things you can do for your financial future.

The stock market has averaged a 10% rate of return over the past 50 years — a period that includes stagflation, the ’79 energy crisis, the dot-com bubble, the Great Recession, and Covid-19.** Those who have remained invested regardless of the economic ups and downs have seen their money grow thanks to compounding.

Instead of letting external economic forces influence your decision, look inward. Remaining focused on your personal long-term financial goals can help you stick to the plan you and your advisor have created.

4. Turn To Your Advisor for Support

If you’re struggling to maintain your serenity, reach out to your advisor. The economic chatter can be stressful and advisors are committed to helping you tune out the noise and remain focused.

Advisors can help you by:

• Contextualizing economic headlines. Advisors spend a lot of time tracking trends and watching markets. They can fill in critical blanks when you encounter a news story that sounds scary.
• Running stress tests. Advisors use technology to help us create hypothetical projections so they can better understand potential upside and downside risk in various macroeconomic scenarios. If you have a particular concern about a macro force, they can run that stress test on your portfolio and walk you through the results.
• Revisiting your financial plan. Advisors are here to help you keep a level head and stay focused on what matters. They can walk through your plan together and review projections to inspire you to stay the course.

Feel free to download this guide and share it with your friends, so they too can benefit from these strategies for navigating market uncertainty during election season.

If you’re feeling uncertain or have questions about how the current events may impact your investments, don’t hesitate to reach out. We’re here to provide guidance, offer perspective, and help you stay focused on your long-term financial goals. 

Warren Street Wealth Advisors

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

* Source: Bratanova-Cvetanova, K. (2024, January 24). Do stock and bond markets become more volatile around US presidential elections? FactSet Insight. https://insight.factset.com/do-stock-and-bond-markets-become-more-volatile-around-us-presidential-elections 

** Source: Price, M. (2023, November 23). Average Stock Market Return. The Motley Fool. https://www.fool.com/investing/how-to-invest/stocks/average-stock-market-return/