Indeed, nearly half (45%) of investors, regardless of political affiliation, believe the results of the 2024 U.S. federal elections will have a bigger impact on their retirement plans and portfolios than market performance. This data comes from Nationwide’s ninth annual Advisor Authority survey, powered by the Nationwide Retirement Institute.
Asked whether this finding was surprising, Eric Henderson, president of Nationwide Annuity, said it was. He suggested investors consider the history of market performance and understand that, typically, the outcomes of presidential or congressional elections are not the best indicators of long-term market performance.
“When you’re investing with long-term goals in mind, what happens in the next four years is only the next part of your journey, so it shouldn’t fundamentally change a strategy that’s designed to position you for success 20 or 30 years down the road,” said Henderson. “That’s a period of time when you would expect political power to shift multiple times.”
He added, however, that on the other hand, it’s understandable Americans are susceptible to emotional reactions in today’s polarized political environment.
“The messages coming from across the political spectrum can be scary and extreme — and the risk is that fear can lead to short-sighted decision making,” he added.
Recession Fears Mounting Among Investors
Another key finding of the study is that investors fear the impact of new policy and opposing party rule on the U.S. economy.
For instance, 32% of investors believe the economy will plunge into a recession within a year if the political party with which they least align gains more power in the 2024 federal elections. What’s more, 31% believe the party they least align with gaining more power in office will negatively impact their future finances, and 31% believe their taxes will increase within 12 months.
Yet, according to Henderson, it’s premature to make assumptions about what the economy will look like after the 2024 election.
“The risk of a recession or other adverse economic outcomes is more likely to be driven by the underlying fundamentals occurring in our economy as opposed to short-term policy decisions,” he said, adding that, regardless, a good investment strategy should focus on long-term goals — not a prediction of what might happen shortly after the next election.
In terms of partisan opinion, the study also found that Republicans expect the worst, with 68% of investors who identify as Republican saying the outcome of a presidential election will have a direct, immediate, and lasting impact on the performance of the stock market. By contrast, only 57% of Democratic investors share this sentiment.
Henderson stressed the importance of remembering that, historically, the stock market has grown over time, regardless of which party is in control. He believes there is little indication that the outcome of the 2024 election will change that.
“Time will tell if the election will make a difference in the near-term, but the fundamental principles of long-term investing are unlikely to change in 2024,” he said.
If you’re considering making changes to your portfolio or investment strategy based on what happens, or what you think may happen, in the 2024 election cycle, Henderson said he strongly recommends you sit down with an advisor or financial professional who can provide a third-party, non-biased perspective on any moves you may be considering.
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