Do You Need to Worry About 2020?

Abracadabra—just like that, it will be 2020. Regardless of political affiliation or level of involvement in the political arena, major election years can feel particularly volatile for investors as political rhetoric and voices shouting proposed policies grow louder, often affecting markets in surprising ways. But the upcoming year and subsequent years of the next presidency need not be such a rabbit in the hat for investors. Take away the illusion of election cycles and their supposed effect on markets, and investors may realize the coming election year and the years that follow may be no different from any other time period.

Predictably unpredictable

If there’s concern about how the election year could affect domestic equity markets, know this: presidential election year returns are not predictable. Take a look at returns of the S&P 500 during election years since its inception. It’s encouraging that returns have been positive during all but four election years. Otherwise, data is not supportive of the idea that markets are affected by presidential elections, political party or the type of election, such as the election of an incumbent.

U.S. Presidential Election Year Returns S&P 500 1928-2016

Source: Thornburg, Ibbotson Associates.

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