This is the 14th U.S. presidential election in which I’ve been eligible to vote. In the middle of a pandemic, it’s certainly different from the first 13. But one way it’s similar is that people always ask me if they should change their investment strategy depending on whether the Democrats or Republicans win. My quick answer is: Vote with your ballot, not your life savings.
I’m not changing my investment strategy based on the presidential election outcome. That’s one of the great perks about being a long-term investor who thinks in decades and not days.
How did I come to this conclusion? It all starts with the data. The firm I co-founded, Dimensional Fund Advisors, looked at the last 95 years of stock returns (all the way back to President Calvin Coolidge). The data show that capturing the long-term returns of the capital markets has not depended on which party controls the White House.
Now I am not saying Coolidge, Hoover, Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush, Clinton, Bush II, Obama, and Trump didn’t each impact the economy and markets in their own ways. Historians will argue about how and how much. But when we ran the data, we couldn’t find evidence that would point to an investment choice you should make based on which party wins. I like to make decisions based on what the data show. There’s nothing in the data compelling enough to cause you to make changes in your investment portfolio based on the outcome of elections.
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