Investors seem to love data – good, bad, and ugly. Many investors are moved by data depending on their own goals. For most of us, we tend to focus on the macro picture (as we should). Day traders and those trying to beat the market read more into the daily headlines. For those of us planning for life transitions, big goals, and even retirement, staying focused on our plan and our time in the market is key.
One of the larger data points that investors like to target, is presidential elections. You would think this would only affect the actual election year. However, folks are always looking to read the tea leaves and one data point investors seem to like is the notorious third year of a new presidential term. And, there is some historical evidence to point to why this is an important year.
You see, since 1928 the third year of a presidential term has generally been an up year in the markets. Specifically, for the S&P 500 (counting its first iteration) it has been an up year 78%(per CFA Institute) of the time. That’s a good record!
Why am I telling you this? Well, the first half of 2023 was off to a fairly good start. We saw some impressive gains in July and August, but then markets pulled back in September. Even with the rollercoaster ride this summer, as of the end of third quarter on September 29, 2023 the DJIA had returned 1.12%. The S&P 500 dropped 5% in September, but still closed third quarter up for the year at 12.13%. And the Nasdaq is reporting 27.27% year-to-date as of September 29.
We will not know until December 29, 2023 whether we are going to be in an historical trend up year for the third year of the Biden administration, or a flat, or down year. No one has a crystal ball. That’s why we create a plan and stick to it. It’s the old mantra, time in the market, not timing the market. No matter how the year shakes out, here are some tips.
Try to ignore the day-to-day financial news hype. I was just reading that most financial “gurus” we see every day, have terrible records with their prognostications. A lot of these shows are focused on day traders and their recommendations are not part of a sound financial plan for most of us.
Market down years and flat years are always great times to up your investments. Yes, up your investments. It seems counterintuitive to buy into a down market but this is when you can eventually bag some of your greatest returns. It’s like a sale for stocks. You can add to your investments now and reap the rewards later. By later, I don’t mean next week. Remember, this is for long-term investors so think about holding your investment for many years.
Are you a few years, or even more, from your goal? Just stay the course. Stick to your plan and continue with your investment schedule whether that’s automatically through your workplace retirement plan, or if you regularly add money to a taxable brokerage account. Remember, time in the market, not timing the market.
So whether this third year is an up year, or a down year, it shouldn’t matter in the long run. The bigger picture is that you have a plan, stick to it, and take the hype with a grain of salt. As an independent Certified Financial Planner™, I can help you make a plan. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #thirdyear #gameplan #staythecourse #invest