As an investor, you might be nervous or wondering how elections can affect your investments. After all, different political parties have different policies and agendas that could affect the economy, the business environment, and the stock market. However, history shows that the long term performance of the major stock market indices is largely independent of who is in power
The UK prime minister election and the FTSE 100
You must have been hiding behind a pretty big rock if you missed the UK election a few weeks ago. You might think that the outcome of the election would have a significant effect on the FTSE 100, the index of the 100 largest companies listed on the London Stock Exchange. Well, here’s how the FTSE 100 has done over the last 2 months which is the month before and about 3 weeks after the election…
FTSE 100 Performance from 1st June 2024 – 24th July 2024, one month before and almost one month after Prime Minister election
If we look even further back at the historical data reveals that the FTSE 100 has been largely indifferent to who is in charge of the UK government.
Massive thanks to Timeline for this chart
The US presidential election and the S&P 500
The other “big” election is the US presidential election – again, how could anyone have missed it? The US is the world’s largest economy and the home of many of the world’s largest and most influential companies.
The US president has a lot of power and influence over the economic policies, the trade relations, and the geopolitical issues that affect the global markets. Therefore, you might think that the US presidential election will have a significant effect on the S&P 500, the index of the 500 largest companies listed on the US stock exchanges. However, again, the historical data shows that the S&P 500 has been largely indifferent to who is in charge of the White House.
Massive thanks to Humans Under Management for this chart
There will always be short term reactions (both good and bad) based on these events, and many others, but in the long run in all sorts itself out.
The bottom line
All elections are important events that can have a lot of implications for the society, the economy, and the world.
There are elections in 64 countries in 2024. We invest globally and so they may all have a short term impact, but eventually, we will all look back and they won’t look like much more than a little blip in time. So for you as a long term investor, they are not as important as they might seem at the time.
The historical evidence shows that the long term performance of the major stock market indices is largely independent of who is in charge of the country. Therefore, you should not let your political preferences or biases influence your investment decisions.
Sit back, enjoy the coverage of the politics if that’s your thing and don’t be worrying about the stuff you can’t control.