The world will watch as the votes are counted, but how much do markets really care about US presidential elections, asks Lukas Brandl-Cheng, investment strategy analyst for Vanguard Europe in a recent article.
- Investors should tune out the noise during election periods and stick to their long-term investment strategy.
- Historically, elections have had minimal impact on stock market performance.
- Even in the months immediately before and after the vote, US stocks have typically been calm relative to history.
As the US presidential election approaches on 5 November, commentators worldwide are closely monitoring the potential implications for financial markets. However, historical data suggests that while elections can stir emotions, they do not significantly impact short-term dynamics in stock markets.
Elections in major economies tend to lead to speculation about what one result might mean compared to another. In some cases, clients may be concerned about the implications of an election result for their investment portfolio.
While US presidential elections are significant and historically important events, election outcomes have little influence on markets. Our research shows that stock market volatility in the build-up and in the immediate aftermath of US presidential elections has historically been minimal—irrespective of the result.
Presidential elections generate lots of headlines, but they should not sway investors to change their financial plans. It’s understandable to have concerns about an election but, as far as portfolios and the markets are concerned, history suggests they are a non-issue.
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