Technology Has Always Changed the World
Over the decades — and centuries — transformative technologies have disrupted industries, displaced workers, and reshaped the global economy. Each time, the adjustment felt significant. And each time, humanity adapted. In fact, living standards improved and more people were employed.
Markets quickly incorporate new expectations following election outcomes. Once the ballots are counted, stock prices reflect, in real time, investor expectations about things such as regulatory or tax policy changes. When these new expectations are baked into prices, we should not expect an election effect to persist.
When people feel uncertain, they may be tempted to make investment decisions based on how they think elections might unfold. But there’s nothing in the historical data that’s strong enough to warrant changing your investment allocation based on who you think might win. In fact, trying to time the market may lead to costly mistakes. Investors are generally better off looking beyond elections and maintaining a steady approach to markets.
There’s an important message here about not overreacting during a downturn—it could be a momentary blip in an otherwise upward climb for the markets. In fact, the Russell 3000 had an intrayear decline of at least 10% in 25 out of 45 years since 1979. In 17 of those 25, the index ended up for the year!