How to take emotion out of investing in a presidential election year

WEST PALM BEACH, Fla. — Investors’ emotions may run high in 2024, especially in the realm of politics as President Joe Biden and former President Donald Trump are poised for a rematch in this year’s presidential election.

“Politics have become increasingly more emotional,” Moira McLachlan, senior investment strategist in AllianceBernstein’s wealth strategies group, said Wednesday at Financial Advisor Magazine’s Invest in Women conference in West Palm Beach, Florida.

However, investors should avoid knee-jerk reactions by setting and sticking to an investment plan, strategists said.

“It’s so important to stay invested, and you have to try to take the emotion out of investing” to keep from doing something “detrimental” to your goals, said Kristina Hooper, chief global market strategist at Invesco.

Trying to time the stock market and predict its movements are largely a loser’s game. For example, over the past 30 years, the S&P 500 stock index had an 8% average annual return, according to a recent Wells Fargo Investment Institute analysis. Missing the 30 best days would have reduced average gains to 1.83%, for example, it found.

There are “a lot of geopolitical issues, a lot of things, that can spook us,” Hooper said.

Over the last four years, the world has witnessed a global pandemic and two wars, for example, said Jenny Johnson, president and CEO of Franklin Templeton.

It has taught investors they can’t predict what’s going to happen, she said.  

“So, diversify that portfolio,” Johnson said.

Whichever party wins the presidential contest — Republican or Democrat — history shows that the winner has hardly had a bearing on stock market returns, said McLachlan.

“We tend to think politics drives everything, but that’s certainly not the case,” she said.