Hello,

What do presidential elections mean for your portfolio?

Should you change your investing strategy based on who wins?

Elections bring a lot of noise, and we wanted to dispel some market myths around this election.

Myth #1: Elections usually bring big market swings.

You would think elections cause major market shifts (given all the politicking and intense emotions).

However, history shows that elections historically don't influence market performance as much as the economy does.

Growth, inflation, corporate profits, and other business and economic trends usually have a stronger effect on the stock market.¹

The president and Congress impact markets through the laws they pass and decisions they make, which are more powerful influences than elections alone.

Myth #2: Markets perform better with one party in power.

You might have heard that markets perform better under Democrats or Republicans.

History shows that markets have performed well under both parties.²

Interestingly, you can see from the chart below that stocks have historically performed best under a “divided” government when neither party controls both Congress and the White House.
  

Myth #3: The “election cycle" means I should change my investment strategy.

You might have heard of the so-called “election cycle,” where markets are supposed to follow a consistent pattern every four years.

The chart below shows S&P 500 performance since 1950.²

You can see that there isn't a consistent pattern to performance, with both negative and positive years over time.

However, on average, markets have been generally positive each of the four years.
 

Emotions are high, and changing your strategy ahead of a contested election can be tempting, but it's not a good idea.

Truth: Elections are just one factor affecting markets over the next few weeks and months.

We can expect volatility around the election, but traders are also analyzing a lot of other factors: 

• The Federal Reserve's path to rate cuts
• Inflation and economic data
• Geopolitics and conflicts overseas

And much more.

Truth: Tax laws and regulatory changes may impact markets in 2024 and 2025.

With many provisions of the Tax Cut & Jobs Act (TCJA) scheduled to expire at the end of 2025, tax policies are something we’re monitoring closely.³

International trade issues may also influence markets if tariffs increase or supply chain problems continue.

Bottom line: Elections bring uncertainty, so we're watching carefully.

We don’t know how the election results will play out over the coming months and years.

So, we’re staying flexible, watching the trends, and making careful shifts where needed.

Do you have any questions about how the election could impact your portfolio? Hit “reply” and let us know.

Sincerely,

Your Eagle Wealth Team

The Week on Wall Street

Stocks posted modest gains last week, with quarterly earnings season in full swing and the election on the horizon.

The Standard & Poor’s 500 Index increased 0.85 percent, while the Nasdaq Composite Index rose 0.80 percent. The Dow Jones Industrial Average advanced 0.96 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.31 percent.^4,5
 

Six in a Row

Stocks bolted out of the gate as the week began. The S&P 500 and the Dow Industrials hit record highs, with the Dow crossing 43,000 for the first time.⁶

Midweek, news of stronger-than-expected retail sales report contributed to overall market momentum. Retail sales rose a seasonally adjusted 0.4 percent in September, topping economists forecasts.⁷

As the week wrapped up, the technology sector helped fuel a rally that pushed the S&P and Nasdaq to another record high. It was the sixth straight week of gains for the S&P 500, Nasdaq, and Dow Industrials.⁸
 

Insight from Corporate Reports

There were many market forces pushing each other around last week.

Corporate earnings reports drove much of the market action. Some of the most extensive financial stocks surprised on the upside, supporting a narrative that the economy remains strong. 

At the same time, a corporate report from one of the world’s largest chip manufacturing contractors revealed continued strong global demand for AI microchips. However, increasing investor anxiety was a constant undertow in trading as the November elections drew nearer.⁹

^{Source: YCharts.com, October 19, 2024. Weekly performance is measured from Monday, October 14, to Friday, October 18. TR = total return for the index, which includes any dividends as well as any other cash distributions during the period. Treasury note yield is expressed in basis points.}
Past performance is not a guarantee of future results. Any companies mentioned are for informational purposes only, and this should not be considered a solicitation for the purchase or sale of their securities. Any investment should be consistent with your objectives, time frame, and risk tolerance. 

1. https://www.usbank.com/investing/financial-perspectives/market-news/how-presidential-elections-affect-the-stock-market.html

2. https://www.fidelity.com/learning-center/trading-investing/election-market-impact

3. https://tax.thomsonreuters.com/blog/what-to-know-about-tcja-expiration/

Chart sources:
https://www.fidelity.com/learning-center/trading-investing/election-market-impact

<sup>4. The Wall Street Journal, October 18, 2024
5. Investing.com, October 18, 2024
6. CNBC.com, October 15, 2024
7. The Wall Street Journal, October 17, 2024
8. The Wall Street Journal, October 18, 2024
9. The Wall Street Journal, October 18, 2024

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.</sup>

^{The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.}

^{The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.}

^{The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.}

^{U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.}

^{International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.}

^{Please consult your financial professional for additional information.}

^{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.  Copyright 2024 FMG Suite.}