Investing Through Political Change: Navigating Sectors in a Post-Election Economy

Investment themes tied to new economic policies often gain momentum during election years, especially when the incumbent president is not running for re-election. 

Once the election dust settles and congressional majorities are determined, it can often seem clearer what areas of the economy might thrive. However, identifying specific sectors that will outperform based solely on the new administration’s policy trajectory has proven challenging.

The graph below shows a ranking of the best and worst performing sectors during each President’s tenure in office, starting with former President Bush Sr. The first takeaway is that there’s no consistent pattern within parties. In other words, sectors that performed well under a Republican president did not necessarily do the same under another Republican, nor did poor-performing sectors remain consistent across different Democratic administrations.

Ironically, sectors have sometimes performed similarly for presidents in different parties. For instance, consumer discretionary and technology were the two best-performing sectors during the presidencies of both former Presidents Barack Obama and Donald Trump—two leaders with markedly divergent political views. Even more surprising, energy was the worst-performing sector under both of their administrations, despite their differing approaches to energy policy!

In conclusion, while election years often generate excitement and speculation in financial markets, it’s critical to resist the temptation to base your investment strategy on the shifting winds of economic policy. Our Investment Road Signs™ presently tell us that market risks are elevating, and having a strategy in place is important, regardless of who holds office.

Have questions or want to speak with our team directly? Contact us.

Robert Amato, CFP®, CIMA®

Principal

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Compass Wealth Management is a Registered Investment Advisor. Advisory services are only offered to clients or prospective clients where Compass Wealth Management and its representatives are properly licensed or exempt from licensure. This article is solely for informational purposes and is not intended to be relied on as a forecast, research, or investment advice, and is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Compass Wealth Management to be reliable, are not necessarily all-inclusive, and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investments involve risks.