It’s the day after a pivotal election, and we don’t have many answers.
Right now, the jury is out on who the next president is, as well as who could win a handful of state races.
Stocks are up across the board, but it’s tough to say what happens next, so investors are leaning on what they know. Technology is leading the market higher, like it has for most of 2020.
We’re bound to learn more about the presidential race and other contests in the coming days as ballots are counted. It looks likely that we’ll see a split Congress, which based on history, has been the preference of the stock market. But a split Congress may also mean a smaller chance for another big round of fiscal aid for U.S. businesses and individuals.
To sum it up: we’re still in wait-and-see mode.
So, what should you do? Right now, the best answer may be nothing.
We expect markets to be especially sensitive to headlines over the next few days as investors search for clues on who could win the presidency. Election weeks are especially volatile. In fact, the S&P 500 has moved more than 2% in every presidential election week since 1992. But a leadership change shouldn’t be a reason for you to change your long-term game plan.
Presidential cycles are one example of how a long-term mindset can pay off. The S&P 500 has been positive in 16 out of the last 19 presidential cycles, and the three that weren’t overlapped with economic downturns. Today, the economy is growing, and we’re optimistic about 2021 for several reasons.
But don’t forget: there will always be ups and downs. Every president since 1950 except for one has dealt with a market decline of 10% or more while leading the country. In fact, 10% drops have happened about once every two years. History is littered with black swan events, or ones that nobody saw coming, that have the potential to upset the market no matter who’s in charge.
It’s been an emotional year, but try to avoid emotional investing: it’s one of the biggest mistakes you can make as an investor. We will get a decision on the election and we will once again be able to focus on the fundamentals that have historically driven the stock market.
We’re here for you, and we’ll keep you informed on market moves as the election situation unfolds.
Lindsey Bell is Ally’s Chief Investment Strategist, responsible for shaping the company’s point of view on investing and the global markets. She is also President of Ally Invest Advisors, responsible for its robo-advisory offerings. Lindsey has a broad background in finance, with experience on the buy-side and sell-side, in research and in investment banking and has held roles at JPMorgan, Deutsche Bank, Jefferies, and CFRA Research.
Lindsey holds a passion for teaching individuals how to become successful long-term investors. She is a contributor at CNBC, and frequently shares her insights with various publications including the Wall Street Journal, Barron’s, MarketWatch, BusinessInsider, etc. She also serves on the board of Better Investing, a non-profit organization focused on investment education.
The opinions expressed here are not meant to be used as investing advice. For more information, visit our website.