Navigating Through Waves of Uncertainty
With all the benchmarks we follow currently at or near record highs – coupled with concerns over the state of US politics, interest rate uncertainty, and conflicts in the Middle East just to name a few – clients have raised some big questions. How do we, as investors, reconcile a soaring stock market with such negative world news? Will the markets continue to rise to even greater heights despite so much turmoil? Or is it obvious that some sort of market correction is imminent? Unfortunately, the answers to these questions are simply unknowable. There is good news though: as a diversified investor, your portfolio has been carefully crafted to withstand choppy conditions and adapt to whatever may be on the horizon. In an effort to ease some of the worries you might be feeling, we’ve decided to address some of these headlines along with our approach and recommendations for getting through uncertain times successfully.
Election Year Volatility
The upcoming Presidential and Congressional elections offer stark choices and are widely seen as divisive. Regardless of the outcome, one side will likely be unhappy with the results since both parties claim that if the other wins, markets will decline, taxes will rise, and economic chaos will ensue. However, history shows that presidential elections usually have very little impact on the markets, no matter which party is in power. In fact, the US markets have roughly averaged the same returns under both Republican and Democratic leadership.
Having said that, the lead-up to election day is sure to be dramatic, likely causing volatility as the markets react. Even so, it’s important to stay patient and remember that short-term movement is a normal part of investing. The US economy is resilient and has adapted to political challenges before, as seen during the Watergate era. As difficult as it may be, try not to let current political concerns sway your long-term investment plans.