Stock Market Insights: Post-election outlook – Historical trends and future investment strategies

Joe Shearrer, is Vice President and Wealth Advisor at Fervent Wealth Management.

As a wealth advisor who closely follows the ebb and flow of the markets, the period just after Election Day always feels like standing at the edge of a new beginning. The recent election has prompted me to assess how the incoming administration’s policies might reshape the economic landscape. The anticipation and uncertainty are palpable, but with change comes opportunity.

While we are just over a week removed from Election Day, the clouds of uncertainty seemed to part as Donald Trump was decisively elected the 47th President of the United States.

The week after an election, investors and analysts typically assess the potential impact of the new administration’s policies on various sectors of the economy.

Investors react to the election results by rebalancing portfolios based on anticipated policy changes. Specific sectors may outperform others depending on the winning candidate’s proposed policies. Markets often move in anticipation of the new administration’s expected fiscal and monetary policies. Expectations of tax reforms, infrastructure spending, or regulatory changes can significantly influence investor sentiment.

We can confidentially state that the bull market not only survived the event risks of this election but thrived in the face of uncertainty. For investors, removing the cloud of uncertainty is, in and of itself, a positive development. Positive performance after Election Day tends to be a good sign for future returns.

Historically, the S&P 500 has generated an average gain of 6.5% in the year following Election Day. Investors can also take comfort in knowing that, historically, the best six-month period for stocks has begun. According to LPL Research, the S&P 500 has historically generated an average gain of 7.2% from November through April. Even in post-election years, returns during these six months have been above average at 5.3%.

The week after a presidential election is a pivotal time for the stock market, characterized by adjustments as investors digest the potential implications of the new administration’s policies. While predicting exact market movements is impossible, understanding historical trends and key influencing factors can provide valuable context for navigating this period. Here are a few strategies investors can implement as the transition of power takes place:

Diversification: To mitigate risks associated with post-election volatility, investors should diversify their portfolios across various asset classes and sectors.

Long-term perspective: While short-term fluctuations are expected, maintaining a long-term investment strategy can help navigate the uncertainties of a post-election market.

Stay informed: Keeping up-to-date on policy announcements and economic data releases can aid in making informed investment decisions.

In times of transition, I’ve found that maintaining a clear focus on fundamental economic indicators—like earnings, inflation and interest rates—provides a steady compass. While policies related to tax and trade certainly influence the markets, it’s these macro forces that truly drive long-term performance. By staying informed, diversifying and keeping a long-term perspective, we can confidently navigate the uncertainties ahead.

Have a blessed week!

www.FerventWM.com