With this week’s news of former President Trump’s conviction in a New York court, investors may be feeling more and more concerned about the potential for the election’s impact on portfolios. While this election year isn’t 2020, many investors may still want to know how to prepare for election-year investing. Recent analysis from T. Rowe Price digs into how markets may respond to this year’s election.
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What, then, did the analysis find? Some key takeaways found that, for example, more than half of the 12-month periods following a presidential election overlapped with an officially recognized recession. That may inform how the market responds to an election overall.
As for how the S&P 500 responds specifically to party affiliation, the stock market tends to do worse in advance of an incumbent party loss. That of course may speak to voters responding to a poor economy and stock market performance. When the incumbent party wins, however, volatility tends to drop, while increasing when the incumbent loses.
Why, then, look to active for election-year investing? Active strategies can look beyond the headlines. Often, they apply fundamental research to take a close look at the firms themselves. Rather than chase economic or political headlines, active strategies look deeper and stick to their principles.
At the same time, however, they also offer flexibility. Given the significant differences in policy views between candidates in areas like renewable energy, for example, an active equity ETF can adapt if the election goes one way or the other in that area, key for certain tech segments.
T. Rowe Price offers a variety of active ETFs that can play a core equity role for portfolios for election year investing. For example, investors may want to consider the T. Rowe Price Capital Appreciation Equity ETF (TCAF ). The strategy has recently risen above $1.5 billion in AUM, having launched less than a year ago.
For more news, information, and analysis, visit our Active ETF Channel.
