Rolling the Clock Back

By Dr. J. David Ashby, CPA, CFP® professional


We recently adjusted our clocks by an hour to take advantage of longer daylight hours, a semi-annual ritual that many would like to eliminate. Let’s take a minute to roll the clock back on markets of the past few years. The first week of January 2021, the Dow Jones Industrial Average hovered around the 30,000 level. By year-end 2021, the Dow closed at around 36,000. Perhaps you saw that 20 percent gain for 2021 coming. But most individuals I talk to didn’t see it happening.

That strong 2021 performance raised expectations for 2022. Most of the big financial institutions were forecasting continued market growth in 2022. However, the Dow ended 2022 at around 33,000, down almost 9 percent! So much for forecasts by the experts. In December 2022, the thought probably crossed your mind, “Will the Dow ever get back above 36,000?” Roll the clock forward to end of 2023 and the Dow was at 37,700!

That brief roller coaster history all happened under a single presidential administration. Unless you avoid all forms of media or live in a cave, you’re aware we are approaching another election in November! And you’re probably wondering “how will this affect my portfolio?” Do markets behave differently in an election year? Like most Americans, you no doubt have an opinion on this subject.

Now roll the clock back about 100 years. That’s roughly 27 administrations (some are less than four years.) Of those 27 administrations, 13 are Republican and 14 are Democrat. U.S. stock markets had positive returns in 23 of the 27 periods. Markets have historically delivered positive returns regardless of who is in the White House. Market returns during an election year and in the year subsequent to an election are also positive on average. Don’t take this as a prediction on the market for 2024. Rather, consider this long-term historical perspective on markets before making any drastic moves to your portfolio.

In the coming months, we will be exposed to well over a billion dollars’ worth of political ads, much of it harsh, negative and even brutal. Wouldn’t it be nice to roll the clock forward past all this! But take some comfort in knowing that the ultimate results probably won’t impact your investments over the long term!

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