Stocks and Elections

We are less than one year away from a presidential election, and I suspect when you get together with friends and family this holiday season, at least one person may try to bring it up. Someone may say, “If [the candidate you don’t like] wins the election, the stock market is going to crash!”       

This is just your regular reminder that, historically, the party in office hasn’t really mattered for the stock market.  

Source: Blackrock

We invest in companies rather than politicians.  If politicians do something weird, which they often do, companies will protect their capital and restructure in such a way as to continue making money.  

Let’s take tax rates for example. The top individual tax bracket was moved from 25% to 63% in 1932, then spiked to 94% in 1944, then from the 1950s – 1970s it went down but never dipped below 70%. The downward cycle continued in 1988 when it dropped to 50% until it was eventually slashed to 28%. During this huge fluctuation the stock market did what it has historically always done. It has gone up and gone down but has trended higher.

Source: Statista.com

So, if someone tells you that you need to amend your long-term investment strategies based on the proposed legislation of a party that may or may not be in office, kindly ignore the suggestion. As a country, we have seen some stuff before, and moving to the sidelines hoping for the perfect time to invest has never been the long-term answer. 

And as a final note, if the government does something that significantly impacts your tax rate, we will work with you to make any necessary adjustments at that time. That is what we are here for.