Can elections worldwide affect my investment portfolio?

2024 is one of the most interesting years in decades, with multiple noteworthy elections taking place globally this year. Unfortunately, multiple conflicts are also taking place around the world.

With change comes uncertainty, and political uncertainty can impact the policies of a country and our daily lives.

It is important, however, to keep in mind that political and even a country’s economic uncertainty is not necessarily related to the stock market and, consequently, to the strategy that needs to be followed with your portfolio.

Notably, we are nearing the end of the high interest rate cycle, with the first rate cuts globally likely to happen in the next few months.

Let’s have a look at the history of presidential elections in the US and their effect on the S&P 500 Index.

To illustrate the impact of presidential elections, the table below shows the market’s performance 12 months before and 12 months after every presidential election since 1964. As you can see, there are more instances of the S&P 500 Index performing better the year after the election than the year preceding it.

If we analyse the history of the JSE, taking into account multiple elections, recessions, market crashes, and even a pandemic — having remained invested and remaining committed to your strategy has always provided the best outcome.

Ultimately, it is important to note that elections and the political and economic uncertainty that comes with them should not be reasons to lose sight of your long-term strategy and portfolio construction.

Indeed, portfolio construction requires thorough research and care. This is why you need to understand that the assets you own in a well-diversified portfolio will move through various cycles during your investment timeline.

In many scenarios, the events we predict could impact our portfolios and decision-making have already been priced into the market, or Mr Market simply does not care about it in the long run.

The best approach is to ensure you have a well-constructed portfolio and stick with your strategy.

Wall Street legend Peter Lynch said it best: Far more money has been lost by investors preparing for or trying to anticipate corrections than has been lost during corrections themselves. — Moneyweb