Still, the market’s history of pretty good results in presidential election years may not be entirely random. For one thing, the White House is never the only office being contested; elections are also held for every congressional district and many seats in the Senate. Consequently, during these election years, campaigning often takes precedence over legislating. This legislative inactivity tends to be welcomed by the financial markets, which generally dislike surprises, big changes and new directions.
However, you can’t really count on past trends to provide a certain roadmap for the year ahead, in terms of the performance of the financial markets. As mentioned above, many factors influence this performance, and at this early stage in the year, we just can’t predict which of these factors will take precedence.
So, instead of worrying about things you can’t control, focus on those that you can. For starters, review your investment mix. Does it still properly reflect your goals, risk tolerance and time horizon? Over time, even if you haven’t made many changes to your portfolio, it can become “unbalanced.” For example, if you own some stocks that have increased greatly in value over the years, these stocks may now be taking up a larger percentage of your holdings than you had intended, bringing with them a higher degree of risk. Consequently, you might want to consider selling off some of these stocks and using the proceeds to fill in other gaps in your portfolio.
On the other hand, if you think your mix of investments is not providing you with the returns you need to help make progress toward your long-term objectives, you may need to add some vehicles that can provide you with more growth potential. After all, it’s 2016 now, so whatever your age, you are another year closer to retirement.
Will this year look like past presidential election years, as far as good returns from the stock market? No one can say for sure. But if you “vote” for smart investment moves, you won’t be sorry.