Don’t Make Major Portfolio Changes Due To Election Concerns, Experts Say

Ignore Short-Term Market Volatility Concerns And Stick With Your Plan, Janus Henderson, Morningstar, UBS Experts Say.
Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management; David Sekera, Chief U.S. Market Strategist, Morningstar Research Services; Ben Rizzuto, Wealth Strategist, Janus Henderson Investors
Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management; David Sekera, Chief U.S. Market Strategist, Morningstar Research Services; Ben Rizzuto, Wealth Strategist, Janus Henderson Investors
Jeff Berman, Contributing Editor & Reporter, Wealth Solutions Report
Jeff Berman, Contributing Editor & Reporter, Wealth Solutions Report

There is major investor anxiety centered around the upcoming presidential election in November, according to Ben Rizzuto, Wealth Strategist for Janus Henderson Investors.

But he, just like two other investment and market experts who commented for this article – David Sekera, Chief U.S. Market Strategist at Morningstar Research Services, and Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management – cautioned that investors, especially those who aren’t retiring soon and can handle some short-term market volatility, should stick with the long-term investment plans that they and their advisors developed.

They also pointed out that nobody knows right now who will win the presidency in the election, there is no perfect move investors can make now even if they did know who will win, the market performed well for most of the Joseph Biden and Donald Trump presidencies, and the market has performed well under prior Democratic and Republic administrations.

Below are the responses of Sekera, Rizzuto and Marcelli on the following questions: What effect, if any, will the 2024 presidential and congressional elections have on investors’ portfolios and the market, and what should advisors tell their clients now?

David Sekera, Chief U.S. Market Strategist, Morningstar Research Services

David Sekera, Chief U.S. Market Strategist, Morningstar Research Services
David Sekera, Chief U.S. Market Strategist, Morningstar Research Services

“As an investor, you need to largely look past any of the short-term volatility that could be caused by the presidential and congressional elections,” Sekera said in a phone interview.

He pointed to a recent report by Dan Lefkovitz, a Morningstar strategist, which said: “When comparing U.S. equity and bond market performance under the past four presidential administrations, we see that stocks did best under Trump and performed the worst under Bush. Equity returns under Obama were also very strong, and stocks have posted solid gains under Biden. Bonds did best under George W. Bush. The broader context is critical to examine, of course.”

On the other hand, Lefkovitz said: “Small-cap value stocks rallied after both Trump’s election in 2016 and Biden’s in 2020, before large growth reclaimed its dominant position over the U.S. equity market. Counterintuitively, technology ended up as the best-performing equity sector under Trump, and energy stocks have done best under Biden.”

Lefkovitz added that, although the “(presumed) candidates in 2024 are familiar, market behavior in 2024 will likely differ from 2016 or 2020.” After all, he said: “Circumstances have changed, and markets learn from the past.”

Rhetorically asking, “How will U.S. elections affect markets?” Lefkovitz responded to his own question by saying: “Morningstar index behavior in 2016 and 2020 is interesting to examine, but the honest answer is: who knows?”

Sekera’s own personal opinion, he said, is: “Media and the market pundits love to prognosticate about how the U.S. presidential election will impact markets. But, in our view, whichever party is in office typically has less of an impact on future market returns than other exogenous and unforeseen variables.”

Therefore, Sekera said: “When I look at a lot of the other research that’s been put out there, I think an investor needs to take a very skeptical eye as far as what that research may or may not be telling investors. First, I think you need to try and determine what is the correct thing to measure, whether that’s the economy or the markets. And then, I think you need to take a skeptical eye as far as how they’ve measured the markets.”

Regardless of the election outcome, it “takes time for new policies to be written, enacted and rolled out,” Sekera said. “Then it takes a different amount of time, even once that occurs, to actually impact the economy enough that it would impact corporate earnings and change valuations.”

Sekera is skeptical about trying to make any large assertations as far as what the market is going to do, he said.

However, he added: “I do think that there will be heightened volatility as we get closer to the election. But, if anything, depending on what the markets do and what the underlying fundamentals are, if we were to have a really large selloff or pullback … depending on the fundamentals at that point in time, that actually could be more of a buying opportunity than anything else.”

Another thing to keep in mind is that a “divided Congress … certainly limits what the president may or may not be able to push through,” he noted.

How the market performs also “always depends on what’s going on in the world,” he pointed out. “Political conflicts can quickly arise [and] overwhelm domestic policy agendas.”

Another important issue for investors and their advisors to factor in is what the client’s “own risk tolerance is [and] what your own investment goals are,” he said.

Ben Rizzuto, Wealth Strategist, Janus Henderson Investors

Ben Rizzuto, Wealth Strategist, Janus Henderson Investors
Ben Rizzuto, Wealth Strategist, Janus Henderson Investors

“The average return of the S&P 500 Index between 1937 and 2022 shows that election-year returns have on average historically been positive and accretive to client portfolios,” according to Rizzuto.

The average return from 1937 to 2022 of the S&P 500 was 11.9%, he said. In non-election years, it was 12.5% and, in election years, it was 9.9%. “So, while election-year returns have historically been somewhat lower than non-election-year returns, they are still additive,” he said.

One major issue now, however, is that there is “significant investor anxiety around the upcoming election,” he said. “In fact, we found that anxiety around the 2024 U.S. presidential election affected 78% of participants in a recent survey” he said his company recently conducted.

“That concern was also tied to investor pessimism around the markets and how they would perform over the next year,” he said. “That anxiety and pessimism could affect investor portfolios if they allow it to push them into emotional decisions around their portfolios,” he warned.

When it comes to the congressional elections, he said: “There are stereotypes about Democrats and Republicans and the affect they may have on the markets. In this case it’s best to look to history and see how different combinations in Washington D.C. have actually played out for the S&P 500. When we’ve had unified government for the Democrats the S&P 500 returned 11.5%. When we’ve had a unified Republican government the S&P 500 returned 16.1%.”

However, on the other hand, he said: “What seems more likely is to have a divided government. When we’ve had a divided [Congress] and a Democratic president, the S&P 500 returned 15.9% whereas it returned 9.4% with a Republican president.”

Based on that data, he said: “There are differences in how markets have performed based on party control. Over the long term, however, the markets have done well regardless of who is president and which party controls Congress.”

That comes with one caveat. “One noteworthy wrinkle is that if the same party retains control of the Oval Office, the market return has historically been 11.8%, while in election years when the presidency changes parties, the market has averaged a 7.8% gain,” he said.

When advisors are figuring out what to tell their clients now regarding the elections, he said: “Advisors first need to remember that their clients are anxious and emotional about this subject and [you should] give them the space to verbalize these concerns. It’s important to remember that emotions can’t be ‘educated away’ so showing clients a chart or average returns may not completely persuade them.”

Therefore, he said: “It’s important for advisors to remind clients that their financial lives and financial goals are not broken up into four-year terms like the presidency. Their financial goals have time horizons that may last 10, 20, 30, maybe even 40 years and could span several presidencies.”

He provided one more important warning: “While we all have our own party affiliations, we shouldn’t let our political leanings or the partisan fervor that inevitably exists during an election year dictate how we plan. To put it more simply: Our financial plans should be bipartisan in nature.”

Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management

Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management
Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management

“GDP growth over the years has been basically the same under a Republican or Democratic president,” according to Marcelli.

“The trends in broad market performance are equally unconvincing,” she said. “While politics certainly have an influence, they are not the main driver of the economy or investments, in our view.”

However, she said: “There are conclusions we can draw from the possible outcomes.” For example, “we can say with a high level of certainty based on who wins the presidential election alone” how regulation and foreign policy will be impacted.

“Biden would generally represent a continuation of the status quo here – which favors a still-hardline stance on China, but with a focus on multilateralism and strategic alliances,” she said. But, if Trump wins, “foreign policy should almost certainly return as a greater headwind and source of market volatility.”

Biden has also “taken an aggressive foreign policy stance in certain instances,” she said. “But former President Trump brings a more unpredictable toolkit that has historically favored tariffs, faster and more aggressive decoupling from China, and more selective engagement with allies when U.S. national security interests are in mind.”

However, regulation “would likely be a tailwind under Trump for certain sectors,” she said. “First and foremost, for energy, more clarity around regulation could ultimately make it easier to explore industry consolidation, increase drilling activity, and organize further exports of natural gas.”

“That said, renewable energy could face headwinds if some of the existing incentives in the Inflation Reduction Act are curbed,” she noted.

But she predicted there will be “less regulatory risk and less headline risk [because] … the likely leaders of regulatory agencies could change hands.” That, she pointed out, “could lead to a more accommodative interpretation of existing regulations [which] could reduce some pressure on compliance costs and capital requirements, as well as less headline risks around anti-financial services hearings.”

She warned, however, “even with these two sectors, I’d caution against going all-in based on an election outcome. Let’s remember that energy outperformed the S&P with Biden and underperformed with Trump. Not because either of them acted out of character, but because macro and geopolitical factors remained bigger drivers.”

She added: “Where it gets a lot more complicated is on the fiscal side, which will heavily rely on Congress as well.”

When it comes to congressional elections, she said: “The obvious thought is that a red sweep is best for the economy and markets because Trump can cut taxes, providing a spark for markets, which was exactly what happened in 2017. But importantly, the economy looks a lot different than it did back then – with strong growth, inflation fresh on minds, and worsening government debt.”

Debt tends to be in the “back of minds until interest payments become one of the biggest lines in the budget,” she said. “Already, this year will see the U.S. spending more on interest payments than on defense. So, we could see markets push back against opening the fiscal floodgates in the form of higher interest rates.”

She added: “Overall, my bottom line is that while it’s possible a unified government outcome provides the most potential for an upside boost for stocks, it’s possible investors could also find the most comfort in a divided government, which will bring less extreme policies, volatility and uncertainty.”

Moving on to what advisors should be telling their clients now, like Rizzuto, she pointed out: “All too often, we see political biases make their way into investment decisions and investors’ outlook for the world. Historical data in sentiment surveys like the University of Michigan Consumer Sentiment Index show that Republican and Democratic sentiment on the economy can often change dramatically and overnight, just based on an election result. This shift has been especially strong in elections where the White House changed hands.”

Therefore, this “type of bias can be very damaging if you act on it – for example, by selling out of the market at the wrong time, [so] portfolio construction is best treated as an apolitical exercise.”

She too cautioned that it was “too early to try to predict the election and make investment decisions based on an outcome.” After all, history suggests this is a mistake. “Candidates who led in the polls in March, April and May, or even into the summer, didn’t necessarily win the race,” she noted as one example.

“In fact, candidates with an early advantage failed to take the keys to the White House in 1980, 1988 and 1992. You usually don’t get a reliable read until after the conventions, and even then it’s not certain, given the complexities of polling in recent years.”

She concluded: “That is not to say there won’t be opportunities to capture as markets misprice assets, or risks to manage. But just not at this juncture in the race.”

Jeff Berman, Contributing Editor & Reporter at Wealth Solutions Report, can be reached at

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