TORONTO -- The U.S. Presidential election is tomorrow and I can almost guarantee there will be an immediate reaction in the stock markets regardless of who wins.
However, there is something to keep in mind.
According to research done by Jonathan Lemco, principal and senior investment strategist with Vanguard Investment Strategy Group, history has taught us, dating back to 1860, there is no statistically significant difference in terms of market performance with a Republican or Democrat in the White House.
That is not to say there won't be wild swings in the global markets but it is typically of a short term nature until the dust settles.
Sure, we will be watching and for Canadians, a focal point will be trade. As it stands, if there is a Joe Biden victory we likely will not see new tariffs and as we know Donald Trump has on many occasions threatened to impose them, despite the new NAFTA agreement. This clearly can have significant impacts at the industry level.
But what about at the investor level? The individual who is trying to save for retirement, build an emergency or save for their children鈥檚 education?
Pause and try not to overreact. Sometimes the best course of action is to do nothing. Although that can be very hard to do.
All too often we let our emotions dictate our investment decisions and that can prove to be disastrous to your portfolio over the long-term. The key to being a successful long-term investor comes down to an art of blocking out the short-term noise. And that is exactly what the U.S. presidential election is 鈥� short-term noise. Some in the industry call it "hot-noise,鈥� compelling you to want to react immediately.
It can be difficult watching the volatility in the market and having the negative impact it is having on your portfolio. Wanting to throw in the towel and pull your money out of the market is a natural reaction but if you can, try to avoid the temptation.
If you are a balanced investor, with a reasonable time horizon of 5 years or more, with a clear understanding of your risk tolerance, stick to your long term goals. Try not to react to short-term events.
As Lemco told me: "For this election, in the long-term, we suspect the result and winning party will become less of a concern relative to other geopolitical and global factors like the pandemic and how countries grapple with that.鈥�
Like you I will be watching on election night while at the same time resisting any immediate need, I have to adjust my portfolio in response to the outcome.
