Investing in an election year: three steps to consider

[Updated article; original published date September 5, 2024] 

1 Understand how elections affect the stock market

The first step is to understand the election’s likely impact, or lack thereof, on your retirement savings. Historically, financial markets have shown resilience during election years. Changes in political control of Congress and the presidency have shown little discernable relationship with long-term stock market performance. Instead, market performance has generally reflected a broad range of economic and business factors over time.

Election seasons can stir up strong emotions and coincide with periods of market volatility. It’s important to keep these feelings in perspective and avoid making investment decisions based on perceived election trends. Acting on short-term events could potentially throw your long-term financial goals off track.

2 Create a retirement plan

During an election year, people often feel anxious and worried about the future. But rather than focus on what you can’t control, focus on what you can—your plan for retirement. And remember, your plan is about more than money; it’s about the life you want to live. To get started, ask yourself: 

• What do you want to do when you retire?
• How will you spend your time?
• How will you stay connected with family and friends?
• What will you do to stay healthy?
• Where do you want to live?

Your company or retirement plan provider may offer planning tools and resources to help you answer these questions and build your plan.

3 Stay the course

The way you invest your retirement savings should have a long-term focus. Markets are affected by many factors, including economic indicators, monetary policy, and corporate earnings, all of which can move stock prices in the short term.

Treat an election year just like any other: take a moment to review your retirement investment strategy. If your retirement plans and goals haven’t changed, and you’re invested for the long term, don’t let election uncertainty steer you off course.

Keep your retirement plans on track

Saving for retirement isn’t always easy, and the constant stream of election headlines can make it even harder to stay focused. But you don’t have to let short-term news drive your long-term decisions. Just remember, when the election cycle ends, you’ll still be working toward the same goal: a longer, better retirement.

FAQs

How does an election affect the stock market?

An election can create uncertainty, but history suggests elections have had little effect on long-term stock market performance. Markets have shown resilience during election years, regardless of changes in political party control in Congress or the presidency. Although prices may move in the short term as investors react to headlines, long-term market performance is influenced by a wide range of economic and business factors.

Is the stock market more volatile during an election year?

The stock market can experience volatility during an election year. Election headlines and uncertainty may contribute to strong market reactions. But elections aren’t the only reason prices rise or fall. Economic indicators, monetary policy, corporate earnings, and other developments can also affect the market. Rather than trying to predict election-related swings, it’s important to keep these short-term movements in perspective and stay focused on your long-term goals.

Should you change your investments during an election year? 

You generally shouldn’t change your retirement investments simply because it’s an election year. Instead, review your strategy to make sure it still reflects your goals, timeline, and plans for retirement. If those haven’t changed and you’re investing for the long term, staying the course may help keep your retirement savings on track.