Skip to content
View all posts

Investing Through Elections: How to Stay Ahead of Market Trends

By: Jill Franks + Ashley McVicker

 Investing Through Elections: How to Stay Ahead of Market Trends
Apple Spotify YouTube

Navigating Elections and the Market: What Investors Should Know

When election season rolls around, the buzz isn't just about politics — it's also about your portfolio. The intersection of politics and finance can create anxiety for investors, and that’s exactly why we brought in John Forbes from Forbes Financial for this episode of the Isn’t That Rich podcast. We dove deep into how elections can influence the stock and bond markets and what decisions you, as an investor, should be making during these uncertain times. Let’s break down some key takeaways that might make you feel more in control of your investments during an election year.

Can the Stock Market Predict Elections?

Surprisingly, the stock market has been a pretty good crystal ball for election outcomes. John shared that in 20 out of the last 24 election cycles, the market’s performance in the three months leading up to an election has accurately predicted whether the incumbent party will stay in power. When the stock market is up from August to November, the incumbent party usually wins. Why? People tend to vote with their wallets. A booming market can make voters feel confident about the current administration.

But there are always exceptions — remember the 2020 election? The market was up, but the incumbent party lost. So while it's a decent indicator, it's not foolproof.

The Best (and Worst) Political Combo for the Market

It turns out that divided government might just be the stock market's best friend. Historically, the market performs best when there's a Democrat in the White House and Republicans controlling the House and Senate. Why? Gridlock. When Washington is tied up in political deadlock, it's less likely that dramatic, market-shaking decisions will be made. Wall Street loves that. On the flip side, the worst market performance has historically happened when the Republicans control both the White House and Congress.

The takeaway: try not to let politics cloud your judgment. As John likes to remind his clients, “Money isn’t red or blue. It’s green.” Stay focused on your long-term financial goals rather than the political party in power.

Should You Pull Out of the Stock Market During Election Season?

One of the biggest mistakes John sees during election cycles is panic selling. Yes, elections can cause volatility in the market, but jumping out of the market is rarely a good strategy. Timing the market is extremely difficult — even for professionals. Instead, John recommends staying the course. Long-term strategies tend to outperform knee-jerk reactions to political headlines.

For younger investors, market dips are a gift. If you're steadily contributing to a retirement plan like a 401(k), market volatility allows you to buy more shares at lower prices — it's like a sale! The key is consistency. Keep investing, and over time, you’ll likely come out on top.

Don’t Let Media Hype Influence Your Investments

Financial news networks thrive on sensationalism, creating a false sense of urgency around market fluctuations. John emphasizes the importance of going on a “media fast” during election season. The constant noise can cloud your judgment and trigger emotional decision-making. While it's important to stay informed, obsessing over every market move or election poll isn’t going to make you a better investor. In fact, it could make you worse off.

What About Taxes?

One of the most significant economic factors on the horizon is the potential expiration of the 2017 Tax Cuts and Jobs Act in December 2025. If nothing changes, personal tax rates and the corporate tax rate could see significant increases. Whoever wins the next election will have a major say in what the next tax overhaul looks like, making this an important issue for investors to keep an eye on.

But again, John's advice remains the same: don’t make drastic moves based on what you think might happen. It's all about having a solid plan and sticking to it.

The Bottom Line: Stick with Your Strategy

As John so eloquently puts it, “Fear is not a strategy.” Whether it’s fear of the election results or anxiety over a volatile market, making decisions based on fear can do more harm than good. Instead, take a step back, look at your long-term goals, and ensure you have a diversified strategy in place that can weather any political storm.

And for those of you who are investing for the long haul — especially younger investors — volatility isn’t the enemy; it’s an opportunity. Consistent investing, regardless of the political climate, is the key to building wealth over time.

Be Kind at Thanksgiving

John’s final piece of advice? "Be kind to each other at Thanksgiving." It’s a reminder that while elections come and go, relationships and family last. Don’t let political disagreements around the dinner table (or in your portfolio) overshadow the bigger picture.

For more tips and expert insights on navigating financial challenges during election season and beyond, be sure to subscribe to the Isn’t That Rich podcast. And, of course, keep an eye on our blog for more episodes that break down complex financial topics into fun and actionable advice.

Your financial future doesn’t have to be tied to the political cycle — keep calm, invest smart, and remember, money doesn’t care about politics!

by