Don’t Let Presidential Politics Interfere with Your Clients’ Retirement Plans

This presidential election campaign season is filled with surprises—and that can be a challenge for investors. If there is one thing financial markets don’t do well with, it’s uncertainty. Uncertainty can lead to three of the most common investment mistakes:

  • Buying at the top
  • Selling at the bottom
  • Changing long-term allocation strategies based on short-term events—such as the results of a presidential election

Now may be a good time for advisors to prepare their clients: Historical trends suggest that volatility is to be expected in the coming months.

A Newcomer Represents Change

When a two-term president departs from office—regardless of whether he was a Democrat or Republican—this change in government makes the future less predictable and the market responds with increased volatility.

By contrast, a review of the last six presidential election years shows that election years with an incumbent president seeking to be returned to office experience significantly higher returns and with less volatility. Since 1992, there have been four elections with an incumbent and two without.

During this time, the returns in an election year with a returning incumbent president (1992, 1996, 2004 and 2012) were an average 36% higher than when an incumbent was not seeking re-election (2000 and 2008). Volatility was 11% lower, on average, during the years when an incumbent was seeking re-election.

Election Cycle: Impact On Market Performance and Volatility

Democrats Have the Market Edge

What significance does party affiliation have to election year performance and volatility? Over the last seven presidential terms (1989-2015), Democrats have held the country’s top office four times and Republicans three. The markets during Democratic administration years returned an average 14% versus a 3% return during Republican administrations.

More than presidential transitions can influence the markets. As we know from this year alone, events like the Brexit vote can move the markets in unpredictable ways, and of course the markets will both anticipate and reflect current and projected economic conditions.

As financial advisors know, the best way to prepare for market volatility is for clients to maintain a long-term perspective. It’s important to stay focused on established investment goals and broader economic trends shaping both the U.S. and international—independent of the short-term political news.

For more on volatility, see our Volatility Opportunity Guide.

    Before investing carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-800-582-6959. Read it carefully before investing.

    The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.


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    Archived material may contain dated performance, risk and other information. Current performance may be lower or higher than the performance quoted in the archived material. For the most recent month-end performance information, please CLICK HERE. Archived material may contain dated opinions and estimates based on our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions at the time of publishing. We believed the information provided here was reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

    Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Fund’s maximum front-end sales load. Had it been included, the Fund’s return would have been lower. For the most recent month-end fund performance information visit www.calamos.com.

    Archived material may contain dated performance, risk and other information. Current performance may be lower or higher than the performance quoted in the archived material. For the most recent month-end fund performance information visit www.calamos.com. Archived material may contain dated opinions and estimates based on our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions at the time of publishing. We believed the information provided here was reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

    Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Fund’s maximum front-end sales load. Had it been included, the Fund’s return would have been lower.

    Archived on September 07, 2017