2024 Investment Outlook

Keeping Cool When Political Rhetoric Turns Hot

We’re entering the home stretch of a remarkably busy year of elections around the world. Voters in more than 60 countries have gone to the polls or will soon cast ballots in national elections.¹

We already have outcomes in some of the world’s largest economies, including India, where Prime Minister Narendra Modi’s party couldn’t secure an outright majority. In the U.K., Prime Minister Keir Starmer’s Labor Party won in a landslide, ending 14 years of Conservative Party control. In another large economy, it took a coalition of left-wing parties in France to fend off a far-right challenge to President Emmanuel Macron.

While these results have tremendous implications in each country, they haven’t triggered sustained moves in global markets. U.K. investors had already priced in Labor’s victory, whereas the tighter races in India and France produced somewhat surprising outcomes and spurred temporary bouts of volatility.

Temporary is the keyword. Market volatility is typical during election season, but the market has historically returned to more typical patterns during the year after votes have been counted.²

A Close Call Is Likely in the U.S.

In just the last few months, the U.S. presidential election campaign has had pivotal moments history will remember: The attempted assassination of former President Donald Trump, President Joe Biden stepping away as his party’s presumptive nominee and Vice President Kamala Harris becoming the first Black woman to be nominated by a major political party.

What should investors make of all this? Throughout 2024, we’ve written about the considerations of investing during presidential election years, and we continue that theme in this edition of our quarterly Investment Outlook. In addition to discussing the opportunities and risks their teams observe, American Century’s investment leaders comment on the ramifications of some of the candidates’ policy positions. They include:

• Trade policies. Each candidate has protectionist tendencies that could have repercussions throughout the global economy and capital markets.

• Mergers and acquisitions (M&A). The Trump administration was generally permissive toward corporate mergers. While Harris’s policies aren’t clear, she’s part of a Biden administration that’s had stricter views on industry consolidation.

• Federal Reserve (Fed) independence. Harris prefers maintaining the Fed’s political independence, whereas Trump has challenged this view.

Avoid Rash Decisions

These closing weeks of the campaign for the White House and control of Congress promise to be contentious and, at times, a source of market volatility. News and polling may tempt investors to change their portfolios or get out of the market altogether. History tells us that neither works out for typical investors.

Here’s what we know: It’s hard to predict election outcomes and their impact accurately. My colleague Rich Weiss likens it to hitting on a trifecta. You must correctly pick the winner. You must accurately assess the policy impacts on individual securities. And you must figure it all out before everyone else.

Data also shows that trying to get in and out of the market based on the election calendar doesn’t work as well as riding out the uncertainty.

We studied the results of staying fully invested in stocks versus going to cash for six months before and after a presidential election. Despite elevated volatility during this span, being fully invested outperformed by a wide margin. Similarly, choosing to be in cash before or after the election underperformed the fully invested approach.³

With all this in mind, the sound investment strategy for election years goes back to the fundamentals of asset allocation. That means accounting for the time horizon, the purpose of the funds you’re managing and your tolerance for risk.

Thank you for entrusting your assets to us.

Victor Zhang

Chief Investment Officer

Senior Vice President

^{¹ Emma Loffhagen, “A Guide to All the World Elections Taking Place in 2024, Democracy’s Biggest Year,” Evening Standard, February 15, 2024.
² FactSet, U.S. National Archives, Library of Congress, American Century Investments.
³ Based on data from 4/30/1932 – 12/31/2021. Source: FactSet, Ibbotson and Associates, Inc., U.S. National Archives, American Century Investments. Four hypothetical investor scenarios were analyzed for each presidential election since 1932. Each hypothetical investor invests $10,000 six months before the presidential election and remains invested in stocks or cash for the six months before and after the election.}