Federated Hermes senior portfolio manager Steve Chiavarone assesses retail earnings, the 2024 Fed rate cut outlook and the January durable goods report.
Uncertainty leading up to a presidential election can often give investors jitters, and some are wringing their hands over the expected rematch between President Biden and former President Trump this fall.
Financial services giant TIAA told FOX Business that as Super Tuesday has drawn near, many clients have been asking the firm’s wealth management team if they should change their portfolios.
Donald Trump and Joe Biden ( / Fox News)
“Clients are generally very concerned about the political climate that we are in,” Niladri “Neel” Mukherjee, the chief investment officer of TIAA’s Wealth Management team, said in an interview. “And typically this concern is never a surprise because it comes every four years. There’s always political uncertainty, but this year, it seems to be a little bit more heightened than I’ve ever seen it in my career.”
To answer the clients’ question, Mukherjee, conducted research going back to 1928, and the data might provide investors some peace of mind.
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Mukherjee found that in the past 24 presidential elections, returns for standard 60/40 portfolios – holding 60% invested in stocks and 40% in bonds – did not move much, with returns of 8.7% total return in election years and 8.5% in non-election years.
Morning trading on the floor of the New York Stock Exchange on March 4, 2024, in New York City. (Angela Weiss/AFP via / Getty Images)
In fact, he found there have been only four presidential years with negative returns since 1928, and all of them occurred amid significant, disruptive events: the Great Depression, World War II, the tech bubble burst and the Great Recession.
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Another encouraging finding from Mukherjee’s research is that in each of the 11 presidential years that the month of January was positive in terms of returns – which we have seen in 2024 – the markets were up for the rest of those years.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 38989.83 | -97.55 | -0.25% |
| I:COMP | NASDAQ COMPOSITE INDEX | 16207.509254 | -67.43 | -0.41% |
| SPX | n.a. | n.a. | n.a. | n.a. |
He says that statistics aside, averages are what they are, and every cycle is different. But generally speaking, the idea is that the markets are more volatile during election years, but they tend to push through and produce decent returns on average.
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“What we are telling our clients is to focus not so much on the elections and the political noise,” Mukherjee said. “Focus on other fundamental factors, which will drive the markets as they always do, which is interest rates, corporate earnings, monetary policy, the Fed’s actions and obviously economic growth.”
He added, “That’s the big message that we are giving investors.”
