Every election season brings the same question to our conversations, and this fall has been no different: “How is the election going to affect my investments?”

It’s a fair question. Elections matter. They shape policy, taxes, and regulation, and they stir up strong feelings on every side. When so much feels at stake, it’s natural to wonder whether our portfolios should respond.

The research gives a calmer answer than the headlines would suggest.

What the History Shows

Dimensional Fund Advisors has studied US elections and stock market returns going back to 1926. A few findings stand out:

  • Election months haven’t looked unusual. Monthly returns of the S&P 500 in election months have generally fallen well within the typical range of returns, regardless of which party won.
  • No party has had a monopoly on market growth. Over nearly a century, the market has trended upward under Democratic and Republican presidents alike, and under unified and divided control of Congress.
  • Early “winners” haven’t stayed winners. In a study of sector returns from 1928 to 2024, Dimensional found that the sectors that did best during an election month beat the overall market by more than six percentage points on average that month. Over the full presidential term that followed, those same sectors performed roughly in line with the market. Prices adjust quickly to what investors expect from new policies, so the advantage tends to fade.

In other words, by the time an outcome is known, the market has usually already priced it in. Trying to reposition a portfolio around who won, or who might win, has historically been more likely to introduce mistakes than to add value. Dimensional co-founder David Booth put it well: vote with your ballot, not your life savings.

Of course, past performance is no guarantee of future results, and every election brings its own uncertainty. But the long record is a helpful counterweight to the urgency of any single news cycle.

Where the Real Risk Lives

If the election itself isn’t the risk, what is? More often, it’s the decision we make in response to it: selling after a rough week, sitting on cash waiting for clarity, or reworking a long-term plan around a short-term headline.

That’s why we put so much weight on how a portfolio is structured, not just what it holds.

A Steadier Approach: Matching Money to Its Purpose

One approach we return to often is called “liability-driven investing.” The name sounds technical, but the idea is simple. Before deciding how much to invest for growth, we first ask what the money needs to do, and when.

For many families, that list includes things like:

  • The next several years of living expenses
  • Known tax payments
  • Tuition, a home project, or a planned gift
  • Charitable commitments or support for family members

Those near-term needs, the “liabilities,” can be set aside in high-quality, shorter-term assets lined up with when the money will actually be spent. The rest of the portfolio, the part meant for long-term growth, has time on its side.

This doesn’t make markets less volatile. What it does is change what volatility means for you. When the next few years of spending are already accounted for, a choppy month (post-election or otherwise) becomes something to watch rather than something to react to. You aren’t forced to sell growth assets at a bad moment to pay for the life you’re living now.

It’s not a forecast or a bet on any outcome. It’s a way of making sure your plan doesn’t depend on getting the forecast right.

A Few Questions Worth Asking

We’d suggest a different set of questions than simply, “What will the election do to the market?”

  • Do I know which of my dollars are meant for the next five years and which are meant for the next twenty-five?
  • If markets dropped meaningfully next month, would anything I care about actually have to change?
  • Is my current plan built around my values and my timeline, or around the news?

If those answers feel clear, the election is likely a story to follow, not a reason to act. If they don’t, that’s a conversation worth having, whatever happens at the ballot box.

We’re always glad to talk through how your plan is built and whether it’s optimized for the life you’re living.