2024 is an election year. I would like to take a look back and history and see if there is anything we can learn from historical markets during election years. There are some rather surprising statistics when it comes to the market, and we must use this data, and the current economic data to think through how we approach 2024 from an investment standpoint.
Our clients already have a plan in place of how we use their money, and the purpose of each asset we put into play, so how we treat those assets has more to do with the long-term plan than what the markets are doing every day. That’s the purpose of planning before placing.
Historically speaking the market performs well during election years. If we look at every election from 1928 to 2016 (take out covid year) then the historical average is11.28% returns. The worst election year performance came in 2008 at -37%, and the best year was 1928 at 43.6%, but more recently 1980 at 32.4%. As importantly over 83% of the time the markets had a positive rate of return in an election year and in the back of my head it makes me think are the markets propped in election years?
Some historical data was just proven rather truthful in that pre-election year average growth is almost 17% and in the year 2023 brought along a 26% gain in the S&P 500.
So that’s the big picture, but what about diving a little deeper. Right now we have a clear two party system, and unless we come up with someone under 80 then we are going to have one of the two fellas running. Democratic policies support certain initiatives that drive value in certain industries and Republican policies do the same for other industries. Politically sensitive stocks are going to be in the areas of energy, healthcare, defense, import/export.
One big area that you would want to pay attention to is the taxation from a corporate perspective and individual taxes. Right now we know that tax rates are set to go up in 2026, which is why we have a lot of tax planning to do in 24/25! Depending on who takes office they will push probability of taxes increasing further one way or the other, and we need to think about that in creating tax strategies for the future.
The election is still only one factor, and the noise of the election will outweigh the impact to the financial markets. This is a year where we stay tight with our principles of planning for the future vs. predicting it. I never liked the 8 ball you shook for a randomized response, as I was never satisfied with “try again.”
—Billy Voyles, Founder & President of Fundamental Wealth Designs
