How Might The Outcome Of The Presidential Election Impact The Stock Market?

With the presidential election around the corner, some of you have been asking how the result of the election may impact your investments. While looking at the past does not provide any guarantee about predicting the future, there are three historical outcomes I would like to share which may help us prepare for what lies ahead:

2016
In the aftermath of what many considered to he a shock victory by Donald Trump, the markets knee jerk-reaction resulted in a whopping -870 point sell-off in futures trading.
 

How did the market fare going forward?
2017 turned out to be one of the least historically volatile years in market history with the S&P 500 closing higher every month (something that had never previously happened) finishing the year up 19.42%.

2012
Remember the Mayan Republican prophecy that the world was to end? The day after Obama’s re-election it felt like that may have actually been the case with the Dow Jones selling off rather sharply -313 points.

How did the market fare going forward?
2013 is now looked upon as the year that put plenty of daylight between the dark days of the Great Recession of 2008-09, with the S&P 500 Index returning an out of worldly 33.9%.

While neither Obama nor Trump deserve all of the credit for the strong gains seen in 2013, and 2017 respectively, the fact that the market was able to move on from the election headlines and focus on more traditional market moving catalysts such as economic fundamentals and corporate earnings. This certainly paved the way for the favorable conditions for the market.

2000
Some of you youngins out there may not remember the hot mess that was the 2000 Presidential election (thank you, Florida). Although a repeat outcome is unlikely, it is nevertheless possible. What happens in the event that we do not receive definitive results on election night and the uncertainty of who will be President drags on for weeks or even months? In this instance, the market (already facing additional headwinds) sold off nearly -8.5% during the ongoing aftermath of the election uncertainty, and an additional -11.86% in 2001. Yuck!

While these historical instances do not paint a clear path forward, this can be looked upon as an opportunity to review your investment allocations and make sure that you are properly diversified. I know this may not be the most reassuring advice, but if you are THAT concerned about the outcome of an event which occurs once every *checks notes* four years, than perhaps the stock market is not the right place for you to keep your investment money.