How will the upcoming election impact the stock market?

"If voting made any difference, they wouldn't let us do it," Mark Twain once quipped. All kidding aside, as we head toward an important U.S. presidential contest in November, investors may be worried that a contentious election season, or a certain outcome, could send markets into a tailspin. Indeed- both parties seem to be pressing towards their own extremes rather than taking a centrist approach.

Although investors should expect heightened volatility during the primaries, staying buckled in the whole year has historically yielded positive returns. Looking at election results back to 1932, U.S. stocks have trended positive regardless of who wins the White House. In fact, a deeper look shows that incumbent re-election years don’t produce much different returns than non-election years: When a president is re-elected, the S&P 500 has averaged a +13.4% return. When a new president wins? Still +9.3%. For reference: The S&P 500 has averaged about 10% annually over the last 90 years

While the election will likely command most investors' attention throughout 2020, stocks ultimately tend to move more in the direction of the domestic and global economy. The U.S.-China trade war, political posturing in Europe, and slowing global economic growth are likely have a more lasting impact on the market. Although GDP growth slowed slightly in 2019, unemployment remains below 4%, wage growth has been solid and consumer spending remains healthy. Historically, the US consumer has been one of the best barometers of stock market returns. If main street can stay healthy – we think the market will too.

Rhetoric around the elections, (especially the primary) won’t cease anytime soon; but try to vote with your ballot and not with your investments. It’s 2020, so let’s keep our vision focused (pun intended) on those things we ultimately can control in our financial life: how much we save, how much we spend, time in the market and asset allocation.

*Morningstar as of 10/31/19. Stock market represented by S&P 500