Election: Time to change course?

While the often contentious presidential election is over, you may still be worried about how a leadership change in Washington will affect your portfolios. While presidential elections do add a layer of uncertainty—and the markets don’t like uncertainty—they typically don’t have a long-term effect on market performance.

“The outcome of the election is meaningful because markets inevitably react, and having some context for short-term market movements can help investors manage expectations,” said Jonathan Lemco, Ph.D., a senior strategist in Vanguard Investment Strategy Group and former professor of political science at Johns Hopkins University. “But in the end, short-term developments are less important to our success than the big-picture trends that will shape markets in the years ahead.”

*Elections can have a short-term effect, and stock market volatility has tended to spike prior to Election Day. But volatility typically stops increasing shortly after Election Day. And then the volatility stabilizes 100 and 200 days after the election, once the markets have had a chance to digest the news.

**From there, based on data going back to 1853, stock market performance is virtually identical no matter which party controls the White House.

All investing is subject to risk, including the possible loss of the money you invest.

Past performance is no guarantee of future results.

Diversification does not ensure a profit or protect against a loss.

*Vanguard calculations, based on data from Thompson Reuters Datastream, 2016

**Global financial data, 1853-1926; Morningstar Inc., and Ibottson Associates, Inc., thereafter