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Written by: Jayson Bronchetti, Executive Vice President, Chief Investment Officer and Head of Hedging and Sustainability at Lincoln Financial and President of Lincoln Financial Investments
History has favored investors who stay the course. It’s a powerful reminder for anxious clients as you help them stay focused on their long-term goals after a contentious election.
The election is over, and if you’re like me, you’ve probably heard from friends, family members and coworkers who are either excited or upset about the results. A big question on everyone’s mind is, “what’s next?”
It’s important to remember that your clients are also likely feeling a wide range of emotions. But no matter where they fall on the political spectrum, they may appreciate hearing some reasons to stay confident. Our client-approved insights can help with these conversations. Here are my top 9 ½ points that you might consider sharing with them.
1. Markets smooth out once the votes are in.
We normally see an increase in volatility leading up to the election, but history shows that it tends to subside quickly after election day.1
2. The stock market has historically rallied once the polls close.
Since 1980, stocks have rallied 16.2% between November 1 and the following June after an election year. And investors who stayed the course gained an average of 11.6% annually over the next decade.1 Are we seeing the start of a rally the morning after the election?
3. Volatility is a feature of investing that should signal opportunity, not fear.
Volatility is a feature, not a bug. Many investors are fearful of market swings and might make mistakes, like selling too low. But research shows that investments made on days of higher volatility saw meaningfully better results a year later.2
4. Some common election myths just aren’t true.
Stocks don’t do well around elections? One party is better for market returns? Presidential popularity had an impact on markets? The answer to all three is a resounding “no!”3
5. Some sectors win or lose depending on which party is in control. Diversification is key.
It’s no surprise that some sectors may flourish depending on who’s in the White House. That said, be careful of positioning portfolios around political outlooks for specific sectors—it’s not the only factor influencing results. Diversification helps clients stay prepared, rather than getting caught up in predictions.
6. Stocks reward long-term focus, not rash decisions based on short-term political drama.
From 1926 onwards, stocks have trended higher over the long term, no matter if there was a Democrat or Republican in charge. $1 invested back then would be worth in the ballpark of $10,000 today.4
7. Economic knowledge is more important than politics.
Over time, equities have performed well no matter who is president. 78% of investors today are concerned about how the election will impact their financial situation, but far fewer are focused on interest rates, which has a huge impact on our economic situation.5
8. Surprisingly, markets have performed better under less popular presidents.
People care about politics — but markets don’t! In fact, markets have performed best — averaging 9.3% since 1961 — when presidential popularity was between 35% and 50%.6
9. Small caps can be agile outperformers in election turmoil.
Since 1980, small caps have outperformed large caps in 7 out of 11 election years, and have outpaced them by 3% in the 6- and 12-month periods after elections. They can capitalize quickly on policy changes and economic growth.7
½ . We all know this, but it’s worth a reminder: None of our economic challenges are new.
It might feel like we’re living in uniquely challenging times, but our founding fathers struggled with many of the same problems, from debt to inflation to threats to democracy.
History has favored investors who stay the course and keep a long-term focus on their goals. While contentious elections can increase client anxiety, you play a valuable role in keeping them focused and on track.
Our Market Intel Exchange can help facilitate these conversations and build stronger client relationships. And for a deeper look at the impact of elections, including strategies to find opportunities in volatile times, see my recent ThinkAdvisor article.
Our team would love to support you as you reach out to your clients. You can contact your Lincoln representative at 877-533-0265.
Jayson Bronchetti serves as the primary investment officer to Lincoln’s Board of Directors and senior management team on all investment-related matters. He is responsible for the executive leadership, oversight and strategic direction of more than $300 billion in assets across both the general account portfolio and the separate account mutual fund complex. Bronchetti is also the chairman of the board of directors of the Lincoln Funds Trust and the Lincoln Variable Insurance Product Trust family of over 100 mutual funds. As enterprise CIO, Bronchetti leads a team of portfolio managers, research analysts, risk managers and client investment strategists. The team is focused on portfolio construction, asset allocation, due diligence of sub-advisors and development of equity, fixed income and alternative investment strategies. Bronchetti also oversees Lincoln Financial’s Market Risk Management team, which is responsible for the company’s $100 billion variable product hedging programs. In addition, Bronchetti is responsible for oversight of the company’s Chief Sustainability Office and is a director on the board of the Lincoln Financial Foundation, which is responsible for the company’s philanthropic efforts focused on financial wellness, youth education and human services.
To read other blog content like this, visit Lincoln's informed financial professional blog.
Related: How the Start of the Fed Rate Cut Cycle Could Impact Investors
1Bloomberg, Morningstar®, 1980 – 8/31/2024. S&P 500 Index volatility represented by annualized standard deviation of daily returns. Election Day represented as November 1st of each year in which there was a presidential election. Returns based on S&P 500 Total Return Index including dividends. See page 6.
2Morningstar®. FactSet, Lincoln Financial. 1/1/1990 – 7/31/2024. Past performance does not guarantee future results. Subsequent 1-year returns represent the average forward 12- month return of the S&P 500 TR based on all days in which the VIX closed within each specified range. VIX is the ticker symbol for the CBOE Volatility Index. See page 7.
3Lincoln Financial, Janus Henderson, Invesco. See page 12.
4Dimensional. Growth of wealth shows the growth of a hypothetical investment of $1 in the securities in the S&P 500 Index. See page 14.
5Janus Henderson Investors, as of June 30, 2024. See page 15.
6Bloomberg, Gallup. Data as of 1/31/2024. See page 16.
7Macquarie, Morningstar®. See page 19.
Past performance does not guarantee or predict future performance.
Lincoln Financial is the marketing name for Lincoln National Corporation and insurance company affiliates, including The Lincoln National Life Insurance Company, Fort Wayne, IN, and in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY. Variable products distributed by broker-dealer/affiliate Lincoln Financial Distributors, Inc., Radnor, PA. Securities and investment advisory services may be offered through non-affiliated entities. This material is provided by The Lincoln National Life Insurance Company, Fort Wayne, IN, and, in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY, and their applicable affiliates (collectively referred to as “Lincoln”). This material is intended for general use with the public. Lincoln does not provide investment advice, and this material is not intended to provide investment advice. Lincoln has financial interests that are served by the sale of Lincoln programs, products, and services.