Preparing for Election Season

As we move closer to the midterm elections, one thing is almost certain: political headlines will become louder, opinions will become stronger, and every news outlet will explain why this election changes everything.

History also suggests that market volatility may increase in the months leading up to Election Day. That's nothing new. Elections create uncertainty, and uncertainty often causes investors to feel anxious.

The greater danger, however, isn't the election itself. It's allowing our political beliefs to influence our investment decisions.

Whatever our political beliefs, it's easy to convince ourselves that the outcome of an election will determine the future of the economy and the stock market. When we feel strongly about politics, we naturally begin looking for information that confirms what we already believe.

History tells a different story.

While every election is unique, the data shows that since 1950, the average stock market return during the year following a midterm election has been almost twice as high as during other years. That doesn't mean history will repeat itself this time. Every election and every market environment is different. But it is a helpful reminder that the headlines surrounding election season often feel far more consequential than the long-term investment results that eventually follow.

Election seasons come and go. The headlines change, the candidates change, and the issues change. But one principle remains the same: investment decisions are best made according to your financial plan, not your political preferences. Staying disciplined may not always feel comfortable, but history suggests it has often been the wiser course.

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