Survey Reveals Investor Sentiments
A recent survey conducted by Janus Henderson Investors, which included 1,000 investors with at least $250,000 in investable assets, sheds light on investor sentiments regarding the 2024 presidential election. The survey found that 49% of the respondents expressed significant concern about the election’s impact on their portfolios. In comparison, 35% were very concerned about inflation, 29% about a recession, and 27% about higher interest rates.
Interestingly, the survey also revealed a generation gap in investor concerns. Approximately 69% of the Silent generation (aged 78 and above) stated that they were “very concerned” about the 2024 U.S. presidential election, while only 37% of Millennials (aged 27-42) shared the same level of concern. This generational discrepancy could be attributed to older investors closely monitoring political developments and worrying about short-term market volatility affecting their retirement savings. In contrast, younger investors may prioritize career growth and debt management, which are less susceptible to political influences.
Historical Market Returns
Amidst this growing unease, it is crucial for investors to review historical market returns during past presidential elections. This data provides insights into the market’s response to periods of political change and offers a broader perspective on patterns and trends that may arise in 2024.
Contrary to popular belief, the historical trends of the S&P 500 during election cycles demonstrate instances where the market not only weathered political transitions but also exhibited resilience and generated favorable returns despite the uncertainties. Analyzing the performance of the S&P 500 from 1937 to 2022 reveals an average annual return of 9.9% during presidential election years and 12.5% during non-election years.
Moreover, research surrounding market performance based on political party control indicates that even during periods of a divided Congress, the S&P 500 returns did not experience significant fluctuations. Under a Democratic president and a divided government, the average annual return stood at 15.9%, whereas under a Republican president and a divided government, it was 9.4%. Similarly, under unified government, the average annual return was 11.5% under a Democratic administration and 16.1% under the Republicans. These findings suggest that market performance is not exclusively dictated by political party affiliations or a divided government in a straightforward and predictable manner.
It is important to note that the relationship between political events and stock market movements is more intricate than a simple cause-and-effect scenario. Historical records indicate that the S&P 500 has shown more positive performance than negative during past election years, further emphasizing the complex nature of this relationship.
Considering Other Variables
While elections and political events contribute to market behavior, numerous other variables can affect portfolios in 2024. Certain sectors, such as healthcare or technology, may react more strongly to election results or policy changes. Hence, investors should adopt a comprehensive investment strategy that extends beyond election-related concerns and aligns closely with broader economic indicators. This approach will enable them to navigate any short-term market reactions or fluctuations with confidence. A well-diversified portfolio provides the necessary resilience in the face of uncertainty, allowing investors to approach 2024 with a sense of preparedness.