08 AUGUST 2024
Whilst stock markets are likely to see increased volatility around the US election in November, investors should stick to focusing on the economic and market fundamentals. A resilient US economy combined with the potential for near-term rate cuts are more important factors than which party ends up in power.
As the chart below shows, US stocks tend to continue higher during all administrations. Why? Because business returns, and therefore investment performance, are driven by economic growth, the cost of borrowing and the degree of competitive advantage, not whether the administration is Republican or Democrat.
Sure, politics can make things noisy and uncertain, causing short-term market gyrations. Over the longer term, however, it is the economic rather than the political performances that really count. Significant market moves caused by political machinations are better viewed as opportunities to add to holdings when pessimism is overdone or lighten up a little when optimism reigns supreme. In other words, as Ben Graham said, be guided by the stock market, but do not fall under its spell.
The content of this communication is for information purposes only. Bentley Reid believes that, at the time of publication, the views expressed are a matter of opinion but cannot guarantee replication of depicted performance. Viewers intending to take action based upon the content of this communication should first consult with the professional who advises them on their financial affairs. Capital invested will be at risk, and you may get back less than you invest. Neither the publisher nor any of its subsidiaries or connected parties accepts responsibility for any direct or indirect loss suffered by a recipient as a result of any action or inaction, in reliance upon the content of this communication.
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