Perhaps the largest unknown facing not only investors but the entire planet is the U.S. 2016 presidential election. However, the worst reaction for investors according to Joe Correnti, Scottrade's senior vice president of brokerage product, would be to panic.
Correnti commented in the blog post that long-term investors shouldn't view the 2016 presidential race "any differently than any other event that might cause quick, troubling moves in stocks." After all, he added that stock market declines are merely a "normal part of market movement."
"The key is to have a long-term plan and stick to it," he said.
Correnti also noted that history doesn't view a presidential election as an event that will bring out the bears from hibernation. The S&P has gained an average of 6.1 percent during the fourth year of a presidential term going all the way back to 1948. The market has also been positive 76 percent of the time during an election year.
Research has also shown there is very little difference in stock market gains based on any particular presidential party affiliation.
Bottom line, while short-term volatility is a "possibility as the markets try to anticipate or speculate which candidate has an edge," investors should keep in mind "you can't control what will happen to the markets before or after Election Day."
"All we can say today is that the stock markets have been generally apolitical," Correnti concluded. "So it might make sense for investors to fight the urge to make portfolio decisions based on party politics. They would likely be better off to stick with an allocation of assets in their portfolios that matches their goals and the amount of risk they're willing to take."
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