How to Invest During An Election Year

Dow Janes - Financial Education

1 Apr 202404:03

Summary

TLDRIn this informative video, financial coach Terry addresses the economic uncertainties during a US presidential election year, highlighting that historical data shows minimal impact on stock market returns. The S&P 500's performance in election years is comparable to non-election years, with positive returns seen more frequently. The video reassures viewers that there's no need to alter investment strategies due to elections, emphasizing the importance of a diversified portfolio and maintaining a long-term perspective.

Takeaways

📉 Economic uncertainty is high in the US, with concerns about interest rates and potential recession.
🤷‍♂️ The impact of a presidential election year on the economy is a common source of confusion and concern for many people.
💡 Studies indicate that nearly a third of Americans worry their financial future could be negatively affected by an election outcome.
🏛️ Despite concerns, historical data shows that elections have minimal impact on stock market returns.
📊 The S&P 500's average return in election years is similar to non-election years, at around 11.3%.
🎉 Election years have shown a higher frequency of positive returns compared to non-election years (80% vs 70%).
🔍 There is insufficient evidence to link the elected party with stock market performance, as many factors contribute to market fluctuations.
🕰️ Presidents often face weaker markets in the early years of their term, with improvements typically seen in the last two years.
💰 Forbes analysis suggests that investing remains an effective way to grow wealth, with the S&P 500 outperforming cash by 8.1% on average.
📈 The best approach to investing is to maintain a diversified portfolio and not to panic or deviate from strategy due to an election year.
🎓 Education is key; free master classes and informative videos are available to help individuals learn about successful investing and money management.

Q & A

What is the current economic situation in the US mentioned in the transcript?
-The transcript mentions that there is a lot of economic uncertainty in the US, with concerns about interest rates and the possibility of entering a recession.
How does the presidential election year add to the economic concerns of people?
-During a presidential election year, people tend to be more confused and concerned about the economy, as they worry about how the election results might affect their financial future.
What percentage of Americans fear their financial future could be negatively affected by an election outcome?
-Studies show that almost a third of Americans believe that their financial future might be negatively affected if the party they least align with is elected.
What does the transcript say about the impact of elections on the stock market?
-The transcript states that studies show an election has a minimal impact on the stock market returns, with the S&P 500's average return during election years being about the same as non-election years.
How does the stock market performance differ between election and non-election years according to the transcript?
-The S&P 500 generates positive returns more frequently in election years (80%) than in non-election years (70%). However, there isn't enough evidence to suggest a correlation between the elected party and the stock market performance.
What factors determine stock market performance according to the transcript?
-The transcript mentions that numerous factors determine stock market performance, including economic indicators, national and international crises, monetary policy, and corporate earnings.
What is typically observed about the stock market performance in the first two years of a president's term?
-The first two years of a president's term typically coincide with weaker markets, while the last two years are more positive.
What does the transcript suggest about the effectiveness of investing during an election year?
-The transcript suggests that investing remains the most effective way to grow your money during an election year, as the principles of good investing still apply.
What does Forbes analysis show about the S&P 500 compared to other asset classes?
-Forbes analysis shows that the S&P 500 generates higher returns than cash, outperforming cash by 8.1% on average compared to other asset classes, with the best return followed by corporate bonds and then gold.
What advice does the transcript give for individuals regarding their investment strategy during an election year?
-The transcript advises that there should be no reason to deviate from or adjust your investing strategy just because it's an election year, and emphasizes the importance of not panicking and maintaining a well-diversified investment portfolio.
What resource does the transcript recommend for learning about successful investing?
-The transcript recommends checking out several videos and a free master class for more insights on how to invest successfully and manage your money.

Outlines

00:00

📉 Economic Uncertainty and Election Impact on Finances

This paragraph discusses the current economic uncertainty in the US, heightened by the upcoming presidential election. It highlights the public's concern about potential negative impacts on their financial future based on the election outcome. The speaker, a financial coach, aims to address how an election year may affect personal finances. It also mentions the importance of subscribing to their content for financial advice and offers a free master class for managing money effectively.

Mindmap

Keywords

💡economic uncertainty

Economic uncertainty refers to a period of unpredictability in the economy, often characterized by volatility in financial markets and concerns about future economic conditions. In the context of the video, it is mentioned that the US is experiencing economic uncertainty, which is causing confusion and concern among people, especially in a presidential election year.

💡interest rates

Interest rates are the percentage at which borrowers can borrow money and the rate at which savers can earn interest on their savings. They are a critical tool used by central banks to control inflation and stabilize the economy. In the video, the discussion around interest rates coming down or the potential for a recession highlights the economic concerns during an election year.

💡recession

A recession is a period of negative economic growth that lasts for at least two consecutive quarters. It is typically characterized by a decline in business activity, increased unemployment, and a drop in the stock market. The video addresses the concern of viewers regarding the possibility of entering a recession amidst economic uncertainty and a presidential election year.

💡presidential election year

A presidential election year is the period when the United States holds its quadrennial election to choose the President and Vice President. This time is often marked by increased political discussion and speculation about how the election outcomes might impact various aspects of life, including the economy. The video emphasizes the heightened sense of uncertainty during such a year due to the potential changes in government policies.

💡financial future

Financial future refers to the economic stability and prosperity an individual or family can expect in the coming years. It encompasses aspects such as savings, investments, retirement planning, and overall financial security. In the video, the focus is on how the election year might affect people's financial future, with studies showing that many Americans worry about negative impacts if a certain party is elected.

💡stock market performance

Stock market performance refers to the overall change in the value of stocks traded on a particular exchange or market index, such as the S&P 500. It is a key indicator of economic health and investor confidence. The video discusses how election years affect stock market performance, noting that historically, there is minimal impact and that the market tends to perform positively.

💡party affiliation

Party affiliation refers to a person's loyalty or support for a specific political party. It influences their voting behavior and political beliefs. In the context of the video, the concern about the impact of a particular party's election on one's financial future reflects the subjective nature of political and economic outlooks.

💡investment strategy

An investment strategy is a well-planned approach to managing one's investments with specific financial goals in mind. It typically involves a mix of assets, risk tolerance, and time horizon considerations. The video emphasizes that election years should not deter individuals from following sound investment principles and maintaining a diversified portfolio.

💡market fluctuations

Market fluctuations refer to the ups and downs in the prices of securities, such as stocks and bonds, in financial markets. These changes are influenced by various factors, including economic data, investor sentiment, and global events. The video reassures viewers that market fluctuations are normal and should not cause panic, especially in the context of an election year.

💡diversified investment portfolio

A diversified investment portfolio is one that includes a variety of assets, such as stocks, bonds, and cash, to spread risk and potentially enhance returns. Diversification aims to reduce the impact of any single investment's poor performance on the overall portfolio. The video highlights the importance of having a diversified portfolio as a strategy to mitigate risks associated with economic uncertainty and election-year concerns.

💡Forbes analysis

The Forbes analysis mentioned in the video refers to a study or report conducted by Forbes, a well-known business publication, that provides insights into financial trends and investment performance. In this context, the analysis is used to support the argument that investing remains an effective way to grow money, even during election years.

Highlights

Economic uncertainty in the US is high due to various factors including potential changes in interest rates and the possibility of a recession.

This is a presidential election year in the US, adding to the economic confusion and concern among the public.

Studies indicate that nearly one-third of Americans are worried their financial future could be negatively impacted by the election outcome.

The speaker, a financial coach from Dow Janes, aims to discuss how an election year can affect personal finances.

The channel publishes videos every Monday to help improve financial literacy.

Subscribers are encouraged to turn on notifications to not miss any future content.

A free master class for managing money is offered, with a link provided in the description.

Historically, election years have minimal impact on stock market returns.

The average return of the S&P 500 in election years is comparable to non-election years, at around 11%.

The S&P 500 has shown positive returns more frequently in election years, at 80% compared to 70% in non-election years.

Insufficient evidence suggests a correlation between the elected party and stock market performance.

Many factors influence stock market performance, not just the president or political party.

The first two years of a president's term often see weaker markets, while the last two years are more positive.

Presidents tend to implement tougher policies early in their term and focus on pro-growth policies as an election nears.

Investing remains an effective way to grow wealth, with the S&P 500 outperforming cash by 8.1% on average.

There is no need to change investment strategies due to an election year; the principles of good investing should still be followed.

Fluctuations in the market are normal and should not cause panic; a well-diversified investment portfolio is recommended.

The channel has several videos on successful investing strategies and a free master class for further financial education.