Election Day and Your Portfolio

Doug Walters, CFA

With Election Day just a week away, politics understandably dominates the conversation. But history offers an important reminder for investors: markets have advanced under both political parties, and election outcomes have not provided a reliable roadmap for future returns. This week, we revisit why voting and investing are best treated as two very different decisions.

Early morning in an American neighborhood, with local businesses opening under warm autumn light, conveying a calm sense of everyday life continuing after Election Day.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

Election Day is approaching. If this election feels unusually consequential to you, you are probably not alone. Elections have a way of doing that. Every cycle brings a new set of candidates, policies, risks, and reasons to believe that this time really is different.

Politically, perhaps it is. Elections matter. Policies matter. Who governs our country can have meaningful consequences for taxes, regulation, trade, spending, immigration, healthcare, and countless other issues.

But there is an important distinction between something mattering politically and something being useful as an investment signal.

A Page Out of History

History has not shown a reliable relationship between which political party controls Washington and how stocks subsequently perform. Historical market returns have varied widely under both Democratic and Republican administrations and under divided and unified governments. Party control, by itself, has not provided investors with a consistently reliable guide to subsequent stock-market returns.

We made essentially the same point ahead of the 2022 midterms. American companies are remarkably resilient. They operate within a system that rewards adaptation, giving management teams strong incentives to respond to changing conditions and pursue profitability.

New regulations? Companies respond.
New taxes? They adjust their plans.
New trade rules, incentives, spending priorities, or constraints? Management teams reassess.

That doesn’t mean government policy is irrelevant to corporate profits. Far from it. It means that predicting an election result is only the beginning of what an investor would have to get right.

You would also need to predict what policies ultimately emerge, how businesses and consumers respond, what the market already anticipated, and finally how asset prices react.

That is an awfully difficult parlay.

What Is Actually Moving Markets?

There is another reason to keep Washington in perspective. Just look at how much time we have spent this year discussing artificial intelligence.

AI-related capital spending has become an important market theme, with substantial investment directed toward semiconductors, data centers, energy infrastructure, and supporting technologies. The largest AI-linked companies also represent a significant share of several major market indexes.

For investors, what happens with that investment cycle, corporate earnings, inflation, interest rates and economic growth may ultimately have much more influence over market returns than the election occupying our televisions today. Recent market action has already demonstrated how shifts in AI expectations and the outlook for interest rates can quickly affect prices.

That doesn’t make AI predictable either. Quite the opposite. It simply illustrates how many forces are acting on markets simultaneously. Elections are one input among thousands.

Vote Your Convictions. Invest Your Plan.

There is nothing wrong with caring deeply about an election. We should. But our political convictions and our investment decisions serve different purposes.

Decide how to vote based on your values, priorities, and beliefs about the future of the country. Decide how to invest based on evidence, your financial goals, risk tolerance, time horizon, and a disciplined investment process.

At Strategic Financial Services, our investment discipline before Election Day looks much like it does after Election Day. We generally favor diversification, opportunistic rebalancing, and remain attentive to valuations, taxes, concentration, and risk. And we try very hard not to confuse uncertainty with a reason to do something. That is consistent with the investment discipline we have discussed throughout this year.

Next week, some politicians will win and some will lose. Whatever the result, thousands of American companies will wake up the next morning and get back to work trying to sell more products, serve more customers, improve productivity, innovate and earn a profit.

As investors, we plan to do something equally uneventful. We’ll get back to helping you make thoughtful financial decisions in pursuit of your best life.

Let us not seek the Republican answer or the Democratic answer, but the right answer.
John F. Kennedy

One thing to watch

Last week, strong demand and continued AI investment were not enough to satisfy investors, as Meta’s mounting capital needs and negative free cash flow intensified concerns about whether the enormous sums flowing into AI will ultimately generate attractive returns.

This week, as we await election day, investors will have their eye on inflation. The Federal Reserve’s preferred inflation measure will offer an updated view of underlying price pressures. With inflation still above the Fed’s target, the report may influence expectations for interest rates and, in turn, financial markets.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on total client assets of over $3 billion, as of 6/3/26.

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