As election season heats up, many investors wonder whether the political outcomes will significantly impact their investment portfolios. With each presidential election cycle, the media is filled with speculation about how different candidates’ policies could sway the stock market. However, while it might be tempting to adjust your investment strategy based on the anticipated election results, historical data, and expert analysis suggest that elections, by themselves, should not dictate your investment decisions.
Market Reactions to Elections
The idea that elections dramatically affect the stock market is a common belief, but the data does not always support it. While presidential elections can indeed set the direction for public policy, which may have longer-term economic implications, the immediate market reaction is often less predictable and more muted than many assume. Research from Vanguard, covering data back to 1860, shows that there is no statistically significant difference in the performance of a balanced portfolio (60% equities and 40% bonds) during presidential election years compared to non-election years.
This finding aligns with broader trends indicating that market movements during election years often reflect more than just the political landscape. Markets respond to a wide range of factors, including economic fundamentals, corporate earnings, interest rates, and global events. Therefore, trying to time market moves based solely on election outcomes is likely a flawed strategy.
S&P 500’s average election-year path since 1950: Truist Advisory Services | Graphic by Lewis Krauskopf
Historical Patterns Around Elections
Contrary to popular belief, elections do not always bring about heightened market volatility. Data from 1984 to 2020 indicates that volatility tends to decrease around presidential elections. In fact, the 100 days before and after an election have shown lower annualized volatility compared to other periods. This reduced volatility might be due to the market’s pricing in potential outcomes well in advance or reflecting broader economic trends rather than just the election news. This stability should reassure investors that the market is resilient, even in the face of political uncertainty.
Bearing that in mind, while the attention around elections can create a perception of instability, the actual impact on market volatility is often less dramatic. For investors, this suggests that the best course of action may not be to react impulsively to the political headlines but rather to maintain a steady approach in line with a long-term investment strategy that prioritizes cutting out the noise of any given year, including election cycles.
The 2024 Presidential Election Scenario
The 2024 election, featuring Democratic Vice President Kamala Harris and former Republican President Donald Trump, presents a particularly interesting case study due to the unexpected departure of President Joe Biden from the race. Such high-profile contests tend to sharpen investor focus on potential policy changes that could affect the stock market, especially concerning tax policies, tariffs, and sector-specific regulations.
It’s crucial to remember that, historically, election outcomes have had minimal long-term effects on market performance. In fact, historical analysis of the stock market’s performance reveals that market trends are more influenced by economic and inflation dynamics rather than the specific outcomes of elections. This underscores the importance of maintaining a long-term perspective and focusing on broader economic indicators rather than getting swayed by political developments. This emphasis on the long-term should make investors feel secure in their investment strategies.
Navigating Election Year Investment Strategies
Investing during an uncertain election year requires focusing on foundational investment principles rather than the transient political climate. Historical data supports the resilience of U.S. markets during election years, showing that they have generally continued to rise despite perceived volatility. This resilience illustrates the nonpartisan nature of markets and the limited impact of political events over the long haul.
For investors, the takeaway is clear: prioritize economic fundamentals over political cycles. Maintain disciplined investment strategies that align with personal financial goals and risk tolerance. Attempting to predict sector-specific impacts or adjusting portfolios based on speculated election outcomes is fraught with risk, as market returns have historically been positive across various partisan combinations.
The Stock Market and Presidencies: Clearnomics, Standard & Poor’s
Long-term Strategies Over Short-term Fluctuations
During election years, it’s natural for investors to experience anxiety due to the uncertainty surrounding political outcomes. Historically, the S&P 500 has averaged a gain of 7% during election years since 1952, though deviations can occur based on specific circumstances like economic crises or global events. Investors are generally advised to employ long-term strategies such as dollar-cost averaging, diversification, and avoiding knee-jerk reactions to political headlines. These strategies help in mitigating the risk of market timing errors and maintaining a steady course towards investment objectives.1
Furthermore, staying informed about relevant economic and political developments, while filtering out sensationalism, can aid investors in making well-rounded decisions. It’s crucial to keep in mind that while markets may react with volatility in the short term, the broader economic indicators such as growth, inflation, and corporate earnings play a more significant role in determining long-term market trends.
Ignore the Election Noise
Presidential elections are undoubtedly important events with the potential to influence market sentiment and policy direction, but they should not drive your investment decisions. The key to prudent investing lies in adhering to a well-crafted financial plan, focusing on long-term goals, and responding to what can be controlled. This disciplined approach ensures that investors can navigate election-induced volatility and continue progressing towards their financial objectives without undue stress.
If you have any questions, give us a call. For additional insight, read “Wealth on Purpose” by Bryan Ballentine.
Sources: Located at the bottom of the article
To hit the ball farther, you need more ball speed, right? Not always
When it comes to a driver fitting, the guiding principle is: “Ball speed is the most important factor.” This seems obvious. Make the ball go faster, and it’s always going to go farther. Generally, this should be your mantra, but although ball speed might be the key to producing distance, it is not everything, and some of the results from our Hot List driver testing show plenty of examples of players getting more distance from shots that didn’t yield the most ball speed.
What gives? Well, total distance is ultimately about the right combination of three ball-flight and swing characteristics: Ball speed is first, but launch angle (higher rather than lower) and optimal spin rate for a given launch angle are the key secondary contributors that let you max out your potential for a certain ball speed. Get those other two right, and you’ll have a more efficient ball flight that might produce better distance than your fastest hits.
Let’s take a look at some Hot List player testing results as captured by the Rapsodo MLM2Pro launch monitor during last fall’s Hot List Summit at the Reunion Resort in Florida. Specifically, three players at three ability levels and three swing speeds. What we saw was how the most efficient and effective drives featured the optimal combination of ball speed, launch angle and spin rate, not merely the fastest ball speed.
First up is Gary Abbott, a 13-handicapper with a 98-mile-per-hour clubhead speed with the driver. Of the 18 driver models he hit, six produced more distance with less than his fastest ball speed. For example, with one driver Abbott produced a shot with eight mph less ball speed that still yielded a total distance that was four yards longer than the shot that had the higher ball speed. How? Well, the longest shot featured less ball speed, but the launch angle was 7 degrees higher (13 degrees versus 6) and the spin rate was more optimal, specifically in the low 2,000s in revolutions per minute versus the low 1,000s. (Although we often think low spin is ideal for distance, too little spin means the ball won’t stay in the air.)
Example 2: 86-mph clubhead speed
Next is Alejandra Bedoya, a former college golfer who is now a 5-handicapper with an 86-mile-per-hour clubhead speed. Of the 15 driver models she tested, the 10 longest hits for each model came from shots with less than the fastest ball speeds. Like Abbott, Bedoya’s most efficient combinations of ball speed, launch angle and spin rate yielded the most distance. In one particular example, Bedoya gave up one mph of ball speed but combined it with an extra degree of launch and 250 rpm less spin. That combo led to nine more yards in total distance.
Example 3: 110-mph clubhead speed
As we move to a player with a faster swing and more consistent center-face contact, though, we saw that ball speed more often than not won the day. Of the 18 driver models hit by Jack Bingham, who swings 110 mph, only twice did he record the most distance with a ball speed that was not the fastest for that driver. In one example, he gave up more than four mph of ball speed, but because his launch angle was 5 degrees lower and his spin rate was more than 400 rpm higher, the shots with the lower ball speed still produced three yards more in total distance.
When you look at these three examples, it’s important to focus on the shots that have an ideal marriage of distance and tighter dispersion. If you think of PGA Tour players as having not only the most ability but the most dialed-in drivers, it’s telling that they only miss the center of the fairway by an average of 22 feet. Percentage-wise, in the past 15 years, they’ve improved that stat a lot more than they’ve improved their driving distance. (Driving distance has increased 4.2 percent since 2009; distance from the center of the fairway has improved 11.7 percent.)
That efficiency of launch conditions is something that is more important than ball speed (and swing speed). Traditionally, the best LPGA Tour players optimize distance for their swing speeds more than PGA Tour players, who can get away with less optimized launch conditions (for instance a negative angle of attack and a lower launch angle) because of their naturally higher swing speeds. Meanwhile, LPGA Tour players are hitting up on the ball and launching their drives 2 degrees higher with the same spin rate as PGA Tour players. It’s why some LPGA players use drivers with less loft successfully than PGA Tour players who swing 30 miles per hour faster.
To be clear, more ball speed is usually going to yield more distance, as long as you’ve got the launch conditions dialed in optimally. That word “optimally” is important. It isn’t a fixed set of conditions. The optimal launch conditions for you are tied to your swing speed and the way your swing delivers the clubhead to the ball. If your move is more of a downward strike on the ball, there is a different set of optimal conditions than if your swing is a more upward strike.
The numbers on a launch monitor are a critical part of fitting, but they are best when they are the most consistent. After all, total distance doesn’t lie, and neither does accuracy. As Ping’s Chris Broadie, head of fitting science, writes in a recent post on the company’s Proving Grounds blog, “Instead of trying to force all golfers into a positive angle of attack with high launch and lower spin, we should customize our fitting methods to identify each player’s optimal launch and spin—and keep unlocking distance.”
Golf Tip adapted from golfdigestcomi
Butternut Squash Alfredo Pasta
Ingredients
Deselect All
3/4 cup heavy cream
3 tablespoons unsalted butter, cut into small pieces
1 pound butternut squash, cubed (about 4 cups total)
1/2 teaspoon freshly grated nutmeg, plus more for serving
Kosher salt
1 pound fettuccine
2 ounces freshly grated Parmesan (about 3/4 cup), plus more for serving
Special equipment: an immersion blender
- Add the cream, butter, squash and 3/4 cup water to a medium saucepan and bring to a boil. Reduce to a simmer and continue cooking until the squash is tender when poked with a fork, about 15 minutes. Puree using an immersion blender until super creamy and smooth, 3 to 5 minutes. Season with the nutmeg and 1 teaspoon salt.
- Meanwhile, bring a large pot of salted water to a boil. Add the pasta and cook until al dente according to the package directions. Reserve 1/2 cup starchy pasta water and drain the pasta. Stir the pasta and Parmesan into the squash sauce and toss until well coated. Add the reserved pasta water 1 tablespoon at a time if needed to loosen the sauce. Serve with more Parmesan and grated nutmeg, if desired.
Recipe adapted from foodnetwork.comii
It’s Not Too Late to Score a Great Deal on Thanksgiving Flights — Here’s When to Book
The most wonderful time of the year is quickly approaching. Which means the time to book the most stressful travel of the year is already here. But even if you’re only considering your Thanksgiving travel plans at the same time, you’re scrambling to put together a last-minute Halloween costume, it’s not too late to score a great deal.
Flight analysts from Scott’s Cheap Flights have put together a guide to scoring the best deal on your Thanksgiving flights this year. Although, typically, the best time to book is one to three months in advance of your domestic travel, this year, procrastinators may have a bit of an advantage.
“In general, we are seeing many more last-minute-ish fares than we have in years past,” according to the guide. This is due, in great part, to the pandemic and many people’s reluctance to board a flight this November. Although demand for travel has bounced back from March 2020, it’s still not yet at pre-pandemic levels. And so, several routes are selling for much cheaper than normal this year.
The Scott’s team found non-stop flights between Las Vegas and Chicago for only $98 round trip (usually this route can be $300 or more for Thanksgiving travel). Travel between New Orleans and Miami or Fort Lauderdale can be found for a remarkable $65 (usually more than $275).
But these deals definitely won’t last — the sooner you book, the better. Generally for Thanksgiving travel, you want to book in early September for the best deals. Although it’s not too late to book, if you keep delaying, prices will only increase. Once we hit the period three weeks before Thanksgiving, prices will soar.
Even if your procrastinator skills are in full force, bear in mind this final piece of advice: airlines are most likely to increase flight prices seven, 14, and 21 days before travel. So if you’ve been watching a flight, set a reminder for these days and try to book before they hit.
And hey, even if you dropped the ball on Thanksgiving flights, consider this your reminder to book winter holiday travel ASAP.
Tip adapted from travelandleisure.com iii
Copyright © 2021. Ballentine Capital Advisors. All rights reserved.
Our mailing address is:
Ballentine Capital Advisors
15 Halton Green Way
Greenville, SC 29607
Sources:
Presidential elections matter but not so much when it comes to your investments
How presidential elections affect the stock market
Investing during an uncertain election year
How election years affect the stock market (a look through time)
1 https://www.stash.com/learn/stock-market-during-election-years/
Disclosure:
Ballentine Capital Advisors is a registered investment adviser. The advisory services of Ballentine Capital Advisors are not made available in any jurisdiction in which Ballentine Capital Advisors is not registered or is otherwise exempt from registration.
Please review Ballentine Capital Advisors Disclosure Brochure for a complete explanation of fees. Investing involves risks. Investments are not guaranteed and may lose value.
This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.
No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. You should not assume that investment decisions we make in the future will be profitable or equal the investment performance of the past. Past performance does not indicate future results.
Advisory services through Ballentine Capital Advisors, Inc.
ihttps://www.golfdigest.com/story/to-hit-it-farther–you-need-more-ball-speed–right–not-always
iihttps://www.foodnetwork.com/recipes/photos/fall-weeknight-dinners
