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Decoding Market Behavior: The Electoral Influence on U.S. Stock Performance

Mike McGlothlin   |   April 2024   |   2-minute read

In the ever-evolving landscape of finance, staying ahead of market trends is paramount to success. At Ash Brokerage, we pride ourselves on equipping our advisors and clients with the knowledge and tools needed to navigate through uncertainty with confidence. Recently, our team embarked on a journey to explore the intricate relationship between U.S. presidential election cycles and stock market performance aiming to provide insightful guidance amidst mounting concerns about market volatility.

The Challenge

As the nation brims with election fervor, it becomes increasingly vital to engage in conversations with clients regarding the potential impact of political uncertainty on their investment portfolios. Despite markets witnessing growth rates of over 20%, it's imperative for advisors to adapt their conversations with clients. By addressing these concerns head-on, advisors can foster a deeper understanding of market dynamics and align investment strategies with clients' long-term financial goals.

Even amidst the current market surge, advisors should adjust their habits and engage clients in discussions about election-related market volatility to manage expectations, mitigate risks, reinforce long-term planning and seize opportunities for portfolio optimization.

The Solution

Our team looked at a comprehensive analysis of historical market data spanning multiple election cycles. By meticulously studying market trends before, during and after presidential elections, we aimed to uncover valuable insights that could inform our advisors' decision-making processes and empower our clients to weather market fluctuations with confidence.

Incorporating these conversation starters can facilitate meaningful discussions with clients:

How are you feeling about the upcoming election?

Can I answer any specific questions you might have about market stability during election cycles?

Do you think we are more likely to see an increase of 20% or decrease of 20% in the next 12 months? Why do you feel that way?

What have you heard about election year market cycles?

On a scale of 1-10, how concerned are you when you hear things about election year market volatility?

These conversations demonstrate your commitment to your clients’ financial well-being, helping build trust and confidence while ensuring clients remain prepared for any market scenario.

Key Findings

  1. Market Volatility Pre-Election: Historically, the U.S. stock market has exhibited heightened volatility in the months leading up to presidential elections. Uncertainty surrounding potential policy changes and political rhetoric often triggers fluctuations in investor sentiment, resulting in increased market volatility.
  2. Post-Election Stability: Contrary to popular belief, our analysis revealed a trend of market stabilization in the aftermath of presidential elections. Regardless of the election outcome, the market tends to recalibrate and adjust to the new political landscape, paving the way for more stable investment conditions.
  3. Opportunity Amid Uncertainty: While election years may bring short-term market fluctuations, they also present unique opportunities for savvy investors. By adopting a long-term investment perspective and capitalizing on undervalued assets during periods of heightened volatility, investors can potentially unlock significant value over time.

The Results

Armed with insights gleaned from our analysis, our advisors were able to proactively address client concerns and formulate tailored investment strategies aligned with their long-term financial goals. By leveraging historical market data and adopting a prudent investment approach, our clients were empowered to navigate through election-related market swings with resilience and confidence.

Knowledge is power. By delving into the nuances of U.S. presidential election cycles and their impact on market behavior, Ash Brokerage has equipped our advisors and clients with the insights needed to thrive in the face of uncertainty. Through strategic analysis and informed decision-making, we remain committed to guiding our clients towards financial success, regardless of the political landscape.

About the Author

Mike McGlothlin, CFP®, CLU®, ChFC®, LUTCF®, NSSA® is a bestselling author, industry-renowned speaker and expert in growth strategies for financial advisors.

Today as the Executive Vice President of Retirement for Ash Brokerage, he leads 65 direct reports who have grown the business line to one of the largest wholesaling teams in the Brokerage General Agency space.

As a professional guide, he can help any financial advisor looking to create exponential revenue growth, to find new clients and better streamline their operations by incorporating simple methodologies and proven models.