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Why are the Markets Stable During Elections? Thumbnail

Why are the Markets Stable During Elections?

We're on the eve of the election. More than 40 million people have already voted in the greatest outworking of our American Republic experiment in history.

This has been one for the record books already, and it's going to be one for the record books as we finish up this election season. The market, however, has been resilient and more stable than we should normally expect or would anticipate.

That's great news for us in the short run. The question is why is it doing that?

Why Are the Markets so Stable During an Unstable Election?

The answer is all about earnings. It does look like many of the large American companies sandbagged the bad news in the second quarter, knowing they were going to get a lot of grace with bad earnings in the second quarter. Third quarter earnings are not ending up as bad as the market had anticipated.

In fact, more than 75% of the companies in the S&P 500 who have reported earnings so far have exceeded their stated earnings expectations. This is great news!

This has caused the market to be stable here, to be resilient, while we wait out the results of the election. Again, the market does not care who wins this election, market doesn't care. They just need to know whose rule book and whose regulation book is going to be running us for the next four years.

An Example in Oil - ExxonMobil

As an example, let's talk about a company like ExxonMobil. This is not an investment recommendation. This is not a company we're necessarily looking at investing, but let's think about ExxonMobil when it comes to how they approach the world.

They're an energy company - they are the number one dirty energy, coal, oil, gas, those kinds of things. But by a very wide margin, they are also the biggest spenders on research and development and the advancement of non-fossil fuels, renewable energy sources, etc. Really, a company like ExxonMobil, (as a microcosm of our overall economy) they don't care who wins this election. They just need to know who's writing the regulations for the next four years so that they can adjust their research and development budgets.

All large companies do this. ExxonMobil is just a little bit more of a glaring example, but that's an example of how the market doesn't care who wins.

Finding Guidance During Elections

We're all worried. We're all stressed about, "Will my guy win?" But at the end of the day, it doesn't matter.

The market is going to built on the earnings of companies and the resilience of the earnings has been strong and therefore, the market has been strong.

Here at Vizionary Wealth Management, we are always here with perspective for the decisions ahead. I hope you're having a great day, a great week. If you're worried about this economic volatility relative to the election, give us a call.