Political Impact in Investing
Investors need to be aware of their own biases when selecting their investments.
The chart below details a University of Michigan study that shows consumer sentiment based off of political party affiliation. Clearly, Americans tend to have a higher sentiment during seasons where their party is in office, and a lower sentiment when their party is not.
Source: Bloomberg, UBS, as of 28 July 2023.
In reality, history shows us that markets do not have a strong correlation with either party being in office. This is more reasoning to stay invested for the long-term.
How should Investors respond to this data?
1. Learn to Manage Biases. It is important to understand your own political biases and examine how that may be impacting your views of investing and financial markets in general. We strongly believe that investing for the long-term while keeping perspective on your own political biases will result in a better retirement outcome.
2. Plan to Stay Invested. It is said that investing in the stock market over the long-term is like yo-yoing up a hill. There are short-term movements up and down based on a variety of factors, but over the run the ending trajectory is higher than the start. Investing for the long-term while managing volatility can result in a better retirement outcome. The media will always promote a reason to exit the stock market, especially during a heated political climate, but markets tend to climb the “wall of worry” over longer time periods. This is detailed in the chart below as the markets climb over a long-term horizon in the midst of several seasons of political change.
Return to Participant Insights
For more information, contact your MCF Financial Advisor today!
Hunter Nighbert
Financial Advisor
hnighbert@mcfadvisors.com
859-967-0990
Schedule a meeting
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