Contribution from Ryan Dressel, Senior Investment Strategist, Orion

For financial advisors guiding clients through these uncertain times, re-visiting the 2020 U.S. election offers a good reminder of how politics and investing intersect. Despite the heightened volatility and uncertainty that often accompany elections, the market’s strong post-election rebound provided a clear reminder of the importance of maintaining a long-term investment perspective. In this context, maintaining a diversified portfolio and resisting the urge to react emotionally to short-term market swings can be critical strategies for long-term success.

Stock Market Before and After 2020 Election



COVID-19 Bear Market:

  • Markets were caught off guard in the first half of 2020, as the COVID-19 outbreak spread into a global pandemic. Stocks quickly entered bear market territory as investors awaited clarity around fiscal and monetary policy, alongside scary health care scenarios.

     

Summer Rally:

  • Stocks ripped higher beginning in the spring and through the summer, as stimulus measures emerged, alongside optimism that a treatment breakthrough would emerge.

  • The S&P 500 hit its near-term low on March 23, 2020, closing at 2,237. A remarkable recovery ensued, as the index gained +56% through the end of August, notching a new all-time high in the process. 

     

Mail-in Ballots:

  • Markets sold off in September and into October that year, as investors took profits from the summer rally, re-considered COVID-19 related impacts, and priced-in uncertainty around the vote. In the final week of October, the S&P 500 fell about -5.6%, its worst performance since March earlier in the year.
  • The stock market performed strongly in the days immediately following Election Day, even though it took several days to declare a winner due to the unprecedented number of mail-in ballots. 
  • On November 9th, while votes were still being counted, Pfizer announced promising results for its COVID-19 vaccine, triggering a massive market rally. The S&P 500 rose by about 7% in the week after Election Day.  Eventually, Joe Biden was declared the winner. 
  • Sector winners:  clean energy, information technology, financials*
  • Sector losers:  energy, utilities, consumer staples, health care*

Market Performance 2020 and 2024
 

Stocks are ahead of the pace set in 2020, with the S&P 500 approaching a year-to-date gain of 20%, but we should all be mindful of some key lessons as the race heats up into November:

  1. Expect volatility but don’t panic
  2. Markets move on policy expectations – not politics
  3. Vote in the ballot box – not with your portfolio
  4. Tune out the noise and keep the focus on your financial goals
  5. The US economy and stock market have a strong track record with both political parties


And perhaps most importantly, we are all in this together! 

*Sector performance measured from 11/5/2020 – 12/31/2020 
All Charts and Data Source: FactSet
The S&P 500 Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks.  
An index is an unmanaged group of assets considered to be representative of a select segment or segments of the market in general, as determined by the index manager for the purposes of managing a specific index. You cannot invest directly in an index.
The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC, a registered Investment Advisor, and are not meant as investment advice and are subject to change.  Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation, and the particular needs of any specific person.