Here's the tea on stock markets and presidential elections.

Last week, a slew of headlines mentioned stock market bubbles and frothy valuations. The implication was that markets might be headed lower because they've risen so high. Last Wednesday, Lewis Krauskopf of Reuters reported:

"Some market participants believe the relentless U.S. stock rally is poised for a breather, even if it remains unclear whether equities are in a bubble or a strong bull run. The benchmark S&P 500…is up over 25% in the last five months, a phenomenon that has occurred just 10 times since the 1930s, according to BofA Global Research…the S&P has already made 16 record highs this year, the most in any first quarter since 1945, CFRA Research data showed."

By the end of last week, we'd seen 17 record highs for the Standard & Poor's (S&P) 500 Index.

If there is a market downturn this year, election sentiment is likely to be one of the reasons for the move. "Market moves during election years do tend to follow a similar pattern—declines leading up to early November, then a surge through year end once the winner is revealed." While past performance does not guarantee future results, the S&P 500 has typically finished presidential election years higher, reported Nicholas Jasinski of Barron's.

Despite the historic record, election rhetoric can make it difficult to remember that markets are efficient and adjust to changing risks. While election sentiment may sway stock markets over the shorter term, global economic growth, company fundamentals, central bank policies, and other factors, such as "the implications of the artificial intelligence [AI] boom on corporate earnings" are likely to matter more over the longer term, reported Jasinski.

No matter how emotional the election becomes, remember that your portfolio was built to meet your financial goals. If your longer-term goals and risk tolerance have not changed, making significant portfolio changes because of worries about the election outcome is not a sound idea.

That said, if you're uneasy about the election and its potential effect on your savings and investments, please get in touch. We want to hear about your concerns and will help you identify potential solutions.

Is your portfolio positioned to take advantage of the trends? Please click here for your free risk assessment. This questionnaire will allow of us to find a way that best fits your needs! We will be in touch to review with you.

For more information on how to be financially prepared, contact our office at (405) 340-1717 or email greg@womackadvisers.com

Greg Womack

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