Politics, Portfolios, & Patience

November 22, 2022

With the mid-term elections on November 8th, you may wonder if any action needs to be taken prior or in response to the results of which party wins the majority on Capitol Hill. The short answer is no.

The longer answer… Over the years, global markets have rewarded investors regardless of who controls the Congress. Data from 1926 to 2022 shows the long-term upward trend of $1 investment in the S&P 500 Index over time to be completely agnostic to political party control. It is important to remember that shareholders invest in corporations, not political parties. Legislative actions  are just one of many factors that may impact markets. When coupled with other influences — like oil prices, interest rates, corporate transactions, consumer supply and demand, for example – it is clear that Congressional control does not move the needle on its own.  In fact, research implies that such factors are already incorporated into current market prices.

Whatever happens in the weeks ahead, remember that your plan takes into account short-term volatility. Trying to make decisions based on politics is not prudent. The benefits of a long-term investment approach outweigh the slim chance of betting on the proverbial right horse at the right time.

Hypothetical Growth of $1 Invested in the S&P 500 Index and Party Control of Congress

Source: Dimensional Fund Advisors. Historical performance results  generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results.

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