U.S. Election: Market Impact

Brent Joyce, Chief Investment Strategist, BMO Private Investment Counsel, discusses the importance of Canadians staying level-headed and focused on the bigger picture throughout this year’s U.S. election.

Transcript:

U.S. Election: Market Impact

Nearly half the planet’s population will see elections this year in over 50 countries (some less democratic than others). Election noise can be a major distraction for investors. While the outcomes matter for many reasons, longer-term investors know that macroeconomic fundamentals drive markets the most, with politics and geopolitics sometimes intervening in the short run.

The U.S. election will garner the lion’s share of the attention. As Canadians, we will watch keenly, but we must keep a cool head and stay focused on the bigger picture. I admit this will be difficult as the world’s largest election machine fuels the world’s largest media machine – we implore clients to stay levelheaded.

Since WWII, the average S&P 500 election year performance has been positive, but at 6.8%, it’s below the long-run average. When the sitting President is seeking re-election, it jumps to 12.1%. But the results are positive regardless of the party seeking re-election. However, a Democrat incumbent outperformed a Republican with average election year returns of 16.8% versus 9.6%.

The past 15 years have seen a financial crisis, four different U.S. Presidents (two from each party), Brexit, Crimea, broad U.S. tariff increases, NAFTA becoming USMCA, China trade wars, pandemic, the wars in Ukraine and Gaza, to name a few. Through all of it, there was, of course, volatility, but nothing prevented the world’s equity markets from being an excellent place to grow wealth. Consider that from December 2008 to January 2024, the total return of the MSCI World Index in Canadian dollars is 458% or a 12.1% compound annual return.

Our advice, stay the course, stay invested.

 

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