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The Election and Your Portfolio

On Tuesday, November 3, many of us will vote. Our vote, and those of our fellow Americans, will shape the direction of our country for years to come. Emotions are running high as many are divided about which party is best for America. As a result, some investors are considering making portfolio changes because of how they predict election winners may affect the market. But historically, investors who take a long-term perspective, looking beyond the four years following elections, have been rewarded by sticking to their plan.

We surveyed Americans to find out how they’re feeling about the upcoming election. (Survey source: Hartford Funds and Engine Insights survey, data collected August 5–9, 2020 from 958 consumers with $100,000 or more investable assets.)

Q

In general, for the 2020 presidential election, which party winning do you think will be better for your investments?

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Market Returns Under Republican and Democrat Presidential Terms

Average real annual S&P 500 Index returns (adjusted for inflation) 1933–2019

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Nearly all of the Democratic average outperformance advantage can be explained by the boom years under Bill Clinton and the subsequent dotcom bust and Global Financial Crisis under George W. Bush. With the exception of these two presidencies, the difference in returns is practically zero.

Source: Would a Biden Presidency Hurt Stock Prices? Hartford Funds, 2020. Data source: Datastream Refinitiv, Robert Shiller dataset, and Schroders, 7/31/93-10/31/19. Notes: Real (adjusted for inflation) total return from 1st year in office to 7/31 of final year in office so as to exclude the election effect (President Trump’s term is shown through 12/31/19).

Indices are unmanaged and not available for direct investment. See bottom of page for index descriptions. Past performance does not guarantee future results.

Q

In general, to what degree do you think presidents influence stock market performance?

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(48% A lot, 46% A little, 7% No effect)

Percentages may not total 100 due to rounding

Over the Long Term the Market Rose Under Both Republican and Democratic Administrations

A hypothetical $10,000 investment in the S&P 500 Index in 1961 would have grown to more than $3 million as of 6/30/2020

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Source: Morningstar and Hartford Funds, 7/1/20. Past performance does not guarantee future results.

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The president is only one of many factors that influence the market and other influences may be stronger. Macroeconomic (macro) factors, such as interest rates, inflation, economic outlooks, changes in policies, and wars, may have more impact than who resides in the White House. As the chart above shows, stocks have done well in the long term with a mix of Democratic and Republican presidents.

Q

Do you plan to make changes to your investments because of the upcoming 2020 presidential election?

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The Advantage of a Balanced Approach

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Stocks—S&P 500 Index; Balanced Portfolio—50% S&P 500 Index and 50 % Bloomberg Barclays US Aggregate Bond Index; Bonds—100% Bloomberg Barclays US Aggregate Bond Index.

Source: Morningstar and Hartford Funds, 2020. Past performance does not guarantee future results.

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Second guessing your investment strategy is natural, especially during election season. It’s a constant struggle between wanting the growth potential of stocks and reduced volatility that bonds can offer.

The goal of a balanced portfolio is to prepare for any market environment or political party. With a balanced portfolio, if one part of your portfolio underperforms, it should have a counterbalance somewhere else in your portfolio.

Q

Which election outcome do you think would be best for your personal finances?

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Market Returns Have Been Better With Divided Government

Average annual S&P 500 Index returns (1937–2019)

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Since 1937, the S&P 500 Index has averaged a 12-month return of 14.6% when the election resulted in a divided government (presidential party was different than House and/or Senate) and 13.0% when a unified government (president and Congress were the same party) was voted in.

Source: Morningstar and Hartford Funds, 2020. Past performance does not guarantee future results.

See Why the Next President Is Unlikely To Sink The Economy—Or The Stock Market

 

Investing involves risk, including the possible loss of principal. Fixed income security risks include credit, liquidity, call, duration, event and interest-rate risk. As interest rates rise, bond prices generally fall.

Index Descriptions

S&P 500 Index is an unmanaged list of 500 widely held US common stocks frequently used as a measure of US stock market performance..

Bloomberg Barclays US Aggregate Bond Index is comprised of government securities, mortgage-backed securities, asset-backed securities, and corporate securities to simulate the universe of bonds in the market.

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