What You Need to Know About the Stock Market During A Presidential Election Year

Presidential election years bring a lot of uncertainty and stress. And that’s not just for the candidates who are running.

In fact, during the 2016 election cycle, one study found that at least 50% of Americans were more stressed out because of the election. And this was true across all party lines.1

So, why does that matter?

Because stressing about election uncertainty can affect your mindset and trigger emotional investing decisions.2

The good news is that you can avoid the frenzy around the upcoming election—and the stress and poor financial choices that may come with it—if you know the facts about the markets during presidential election years. Knowing these facts can help you keep a level head no matter what the outcome of the next election is.

7 Facts About Markets In A Presidential Election Year

Don’t Let the Election Frenzy Derail a Good Investment Strategy

It’s no secret that presidential election years are uncertain times—and that investors and the stock market like certainty.

It’s also no secret that the stock market is influenced by several factors—and that a presidential election may not even be the most significant one.3

Of course, it can be easy to get caught up in campaigns, politics, and elections. And they do matter. Just not as much as you may think when it comes to investing.

Unfortunately, too many people let ideas about who could win office—and what they’ll do when they get there—run wild. And that can mean more stress and anxiety that overshadow sound investment choices and strategies.

In the end, stressing about the “what ifs” of the election just isn’t productive. As portfolio managers, we have seen how elections can fuel investors’ stress and lead them astray when it comes to their financial choices and their long-term goals. We also know how helpful it can be to have a sounding board when emotions run high. That’s why we’re here.

So, while the excitement of the election can be great inspiration to vote, don’t let it drive your investment choices. And, remember, whatever happens on November 3, 2020, life will go on. Instead of stressing about the “what ifs,” give us a call. We are here to support you, and we can help you create a personal financial strategy for the election year and beyond.

1 – https://www.apa.org/news/press/releases/stress/2016/presidential-election.pdf
2 – https://www.npr.org/sections/thetwo-way/2016/10/15/498033747/survey-says-americans-are-getting-stressed-by-the-elections
3 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
4 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
5 – https://insight.factset.com/third-year-after-presidential-election-charm-for-sp-500
6 – https://www.usatoday.com/story/money/2019/11/05/election-2020-how-does-stock-market-perform-election-year/4165271002/
7 – https://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html
8 – https://www.capitalgroup.com/individual/planning/investing-fundamentals/presidential-election.html

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents. 

Is The Sky Really Falling?

“Record Economic Plunge”1
“Second-Quarter GDP Plunged by Worst-Ever 32.9%”2
“U.S. Economy Contracted at Record Rate Last Quarter”3
It sure sounds like the sky is falling.

Is it really? Let’s take a step back and put the news in perspective.

The coronavirus shutdown thumped the economy, businesses, and workers badly over the last two quarters, and it’s uncertain how quickly we’ll recover.
We knew that Q2 GDP numbers (Gross Domestic Product) were going to be horrible. In fact, in May, the Federal Reserve thought they were going to be even worse.4
So, ~33% down is actually better than expected.
But, despite the headline, we didn’t actually “lose” 33% of economic production last quarter. The Commerce Department reports data on an “annualized” basis to make it easier to compare; so, if you looked at it quarter-over-quarter, the economy lost 9.5% since Q1.5

That’s still an eye-watering blow to the economy, but it’s not an apocalypse.
The largest contributing factor to the economic losses was a steep drop in personal spending, particularly on services, which makes complete sense in a shutdown.6
Three points before we move on:

  1. This is an advance estimate for Q2, and we will see revisions as more data is finalized.
  2. Though this is the sharpest drop in the shortest time in history, it was caused by the shutdown, and we’re already climbing out of it.
  3. 63.8% of economists think Q3 is when we’ll see the recovery really pick up steam, and the current forecast is for 15.2% annualized growth this quarter.7

So, what’s up with markets?
We think markets are being driven by a few big trends.
In a previous note, we mentioned what a Nobel-laureate economist calls “FOMO mania” by investors who fear missing out on the bounce. We think that’s still in effect as investors continue to pile into stocks, especially in the tech sector.8
We also think the market is being supported by massive government spending and Federal Reserve intervention.
And thirdly, we think a lot of traders are betting heavily on the recovery. If states have to shut down again, the collective delusion may collapse and trigger a correction. We’re watching for that.

How long will the rally last? That’s anyone’s guess. We’ve seen many cheerful forecasts predicting new all-time-highs. We’ve also seen plenty dolefully predicting the next crash.
With so much unknown, they’re all guesses. Even in less-murky circumstances, the market gurus are only accurate about 47% of the time.9
So, since we can’t predict what’s going to happen in Q3 and Q4, we’re staying agile and focusing on the fundamentals of good planning.

We know, it’s a really boring answer. But that’s how we give ourselves the best opportunity for success in chaotic times

We thank you for your trust and look forward to continuing to serve  you. If you have specific questions regarding your account, please contact your advisor. 

P.S. Apple recently announced a four-for-one stock split.10 Here’s what that means: Stock splits are “cosmetic,” meaning they don’t change anything fundamental about the company. Splits just make the stock more accessible to investors by lowering the price (like getting four quarters for a dollar). If you currently own Apple stock, you’ll receive three more shares for every share you own in late August. Have questions about it? Let us know.
1https://www.chicagotribune.com/business/ct-biz-us-economic-plunge-20200730-t25tj4pzdvcmrirdufstpla2nm-story.html
2https://www.cnbc.com/2020/07/30/us-gdp-q2-2020-first-reading.html
3https://www.wsj.com/articles/us-economy-gdp-report-second-quarter-coronavirus-11596061406
4https://www.newyorkfed.org/research/policy/nowcast
5https://www.washingtonpost.com/business/2020/07/30/did-third-economy-really-vanish-just-three-months/
6https://www.cnbc.com/2020/07/30/us-gdp-q2-2020-first-reading.html
7https://www.wsj.com/graphics/econsurvey/
8https://www.cnbc.com/2020/07/28/paul-krugman-sees-mania-by-stocks-investors-driven-by-fomo.html
9https://www.cxoadvisory.com/gurus/#aggregate
10https://www.cnbc.com/2020/07/30/apple-just-announced-a-stock-split-heres-what-that-means-for-investors.html

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Market Volatility in Perspective

Financial markets have been roiled recently amid fears over the impact of the fast-spreading coronavirus. These near-term disruptions to economic activity are the result of efforts to contain it. We see a downshift in 2020 global growth, with uncertainty around the size and pace of slowdown. While there are always unplanned risks, we do expect a rebound in activity once the disruptions dissipate and don’t see it derailing the U.S. expansion at this time.

What are key takeaways for investors? First, we encourage investors to keep things in historical perspective. Second, know the importance of staying invested and avoid reacting in ways that could derail long-term financial goals. 
 

Keep things in perspective

To provide historical context, the table below illustrates how the stock market responded during other past growth scares and bear markets. It also shows the period of positive market performance in the 12 months that followed these crises.

Stay invested

The chart below shows how a hypothetical $100,000 investment in stocks would have been affected by missing the market’s top-performing days over the 20-year period from January 1, 2000 to December 31, 2019. An individual who remained invested for the entire period would have accumulated $324,019, while an investor who missed ten of the top-performing days during that period would have accumulated $161,706.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
©2020 BlackRock, Inc. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. or its subsidiaries in the United States and elsewhere.
All other trademarks are those of their respective owners.
Prepared by BlackRock Investments, LLC, member FINRA. This material is provided for educational purposes only. BlackRock is not affiliated with any third party distributing this material.

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Navigating A Market Correction

Corrections are anxiety-provoking.

They make us wonder if we got it wrong. If we’re going to be ok.

If this time is “different.”

After all, the S&P 500 plunged “at unprecedented speed,” and this was the “worst point drop in history.”1

Should we give in and get out? Sit on the sidelines until it all blows over?

No.

Market corrections are completely, boringly normal.

Whether it’s an epidemic, geopolitical saber-rattling, natural disaster, or a financial event, corrections happen regularly. They’re a natural part of the market cycle.

Here’s the historical take: Markets experienced 26 corrections between 1946 and 2018. On average, markets declined 13.7% and took four months to recover.2

To a long-term investor, a correction is a speed bump.

We can’t predict how long or how deep this correction will be, but we’ve been here before.

And markets have recovered.

Corrections are not something to panic about. Even when panicky headlines are everywhere. The 24-hour media cycle is all about stoking fears to draw eyeballs and shares.

The biggest mistake a long-term investor can make right now is to give in to the fear and make a big change in response to the selloff.

Emotional reactions to markets — whether it’s euphoria during a rally or anxiety during a correction — are deadly to long-term success as an investor.

It’s easy to answer a risk tolerance questionnaire and commit to a strategy when the market’s up.

It’s much harder to stick to the strategy when your portfolio drops. When it’s gut check time.

But you can’t reap the rewards of long-term investing if you don’t take the bad days along with the good.

We created your strategies to withstand turbulent markets. To pursue your long-term goals in all market environments.

We’re watching markets closely and will communicate with you if calculated changes to your portfolio are necessary.

Right now, we’d like you to do 3 things:

  1. Take a deep breath and remember that you’ve got a team of professionals behind the wheel.
  2. Trust the process. Remember the conversations we had about your goals and the reasons behind the choices we made together.
  3. If you’re experiencing anxiety, turn off the news, stay off social media, and go do something fun.

If you need a pep talk or to discuss your investment strategy, please reach out to your advisor. We’re here for you and happy to talk.

PFG Private Wealth Management, LLC
813-286-7776
www.pfgprivatewealth.com

1https://www.cnn.com/2020/02/28/investing/premarket-stocks-trading/index.html
https://www.cnbc.com/2020/02/27/stock-market-today-live.html

2https://www.cnbc.com/2020/02/27/heres-how-long-stock-market-corrections-last-and-how-bad-they-can-get.html

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only. The S&P 500 is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are not available for direct investment. The performance of the index excludes any taxes, fees and expenses. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.  Insurance products and services are offered and sold through Perry Financial Group and individually licensed and appointed insurance agents.

What’s the Real Return on 12 Month CDs?

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.  Insurance products and services are offered and sold through Perry Financial Group and individually licensed and appointed insurance agents.