As the upcoming U.S. election comes into focus, so does the need for investors to reassess their portfolios and strategies. With the heightened uncertainty and volatility the election season can bring, smart investors will want to make sure they benefit from the ‘seasonal playbook’ that has been established in past elections.
One of the unusual macroeconomic factors associated with election years is the performance of the stock market. Many financial analysts have identified a market pattern during past elections, one which sees stocks decline and then rebound again prior to the election. What drives this pattern? It’s a combination of factors such as uncertainty, speculation, and political positioning.
For investors this means that one of the most advantageous approaches to taking advantage of this seasonal playbook is to sell on the first peak, and then buy on the second or later peaks. In this way the investor is able to take the opportunity to increase their position in the market at a discounted price from the initial peak.
Another important tenet of the seasonal playbook is to ensure that your portfolio remains diverse. Avoid concentrating too much of your investments in sectors that may be affected by the election results. For example, energy sector stocks such as coal and oil may be particularly vulnerable to the election outcome, depending on the policies of the incoming president. On the other hand, sectors such as healthcare and technology may benefit from the election outcome.
Finally, investors should also pay close attention to corporate earnings performance in the months leading up to the election. A pattern of weak earnings performance could provide an indication of the level of economic uncertainty prior to the election. Paying attention to these indicators and formulating a plan for managing your portfolio accordingly can be an important part of capitalizing on the seasonal playbook in the election year.
By following this seasonal playbook in election years, investors have the potential to benefit from both the upside and the downside of the market during this time of turbulence. With a properly diversified portfolio, smart investing strategies, and focus on macroeconomic indicators, investors can ensure that their portfolios are in position for maximum gains.
As the upcoming U.S. election comes into focus, so does the need for investors to reassess their portfolios and strategies. With the heightened uncertainty and volatility the election season can bring, smart investors will want to make sure they benefit from the ‘seasonal playbook’ that has been established in past elections.
One of the unusual macroeconomic factors associated with election years is the performance of the stock market. Many financial analysts have identified a market pattern during past elections, one which sees stocks decline and then rebound again prior to the election. What drives this pattern? It’s a combination of factors such as uncertainty, speculation, and political positioning.
For investors this means that one of the most advantageous approaches to taking advantage of this seasonal playbook is to sell on the first peak, and then buy on the second or later peaks. In this way the investor is able to take the opportunity to increase their position in the market at a discounted price from the initial peak.
Another important tenet of the seasonal playbook is to ensure that your portfolio remains diverse. Avoid concentrating too much of your investments in sectors that may be affected by the election results. For example, energy sector stocks such as coal and oil may be particularly vulnerable to the election outcome, depending on the policies of the incoming president. On the other hand, sectors such as healthcare and technology may benefit from the election outcome.
Finally, investors should also pay close attention to corporate earnings performance in the months leading up to the election. A pattern of weak earnings performance could provide an indication of the level of economic uncertainty prior to the election. Paying attention to these indicators and formulating a plan for managing your portfolio accordingly can be an important part of capitalizing on the seasonal playbook in the election year.
By following this seasonal playbook in election years, investors have the potential to benefit from both the upside and the downside of the market during this time of turbulence. With a properly diversified portfolio, smart investing strategies, and focus on macroeconomic indicators, investors can ensure that their portfolios are in position for maximum gains.
