Periodically during a presidential election cycle, we receive questions from clients about the desirability or wisdom of altering the composition of a portfolio based on what might unfold after the election. Dimensional Fund Advisors recently published an excellent new article addressing this topic titled, “Presidential Elections and the Stock Market.” In this article, Dimensional finds that historically, volatility and returns are not noticeably different based on which political party is elected into office. A key takeaway highlighted in the article is that, “Over the long run, the market has provided substantial returns regardless of who controlled the executive branch.” While we all may feel that it is “different this time,” historical data points to avoiding the temptation of making changes based upon predictions.
Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. The S&P data is provided by Standard & Poor’s Index Services Group.
Source: Dimensional Fund Advisors