Greg Davis reminds investors to tune out election noise and maintain a long-term perspective.
Greg Davis
Greg Davis, CFA, is Vanguard's president and chief investment officer, responsible for the oversight of approximately $5 trillion managed by Vanguard Fixed Income, Equity Index, and Quantitative Equity Groups. The funds managed by these groups include active and index stock and bond funds, money market funds, and stable value funds. Previously, Mr. Davis was principal and global head of Vanguard Fixed Income Group, responsible for its portfolio management, strategy, credit research, trading, and planning functions. He has also served as the company’s Asia-Pacific chief investment officer and a director of Vanguard Investments Australia. Mr. Davis is a member of the Treasury Borrowing Advisory Committee of the U.S. Department of the Treasury. Mr. Davis earned a B.S. in insurance from The Pennsylvania State University and an M.B.A. in finance from The Wharton School of the University of Pennsylvania. He is a CFA® charterholder and a member of the CFA Society of Philadelphia.
Navigating the post-election environment
History suggests that investors shouldn’t be concerned about material asset return differences under different political administrations. A portfolio of 60% equities and 40% fixed income has produced an annual compound return of 8.1% since 1860 with a Republican president and a 7.8% annual compound return with a Democratic president.1
Donald Trump is the winner of the 2024 United States presidential election.
Although there is clarity around the outcome of the election, some investors may feel the need to do something. While investors may be tempted to adjust their portfolios, no one knows how the markets will perform in the short term, and, in many cases, timing the market for exit and then reentry simply results in selling low and buying high. What we do know is that dozens of potential factors can affect the market, making it difficult to base market strategy on a single factor such as a presidential election. In fact, Vanguard research has found no statistical relationship between asset returns in election and nonelection years.
Historically, the best and worst trading days have tended to be closely timed (see chart). Investors who try to correctly time both a market exit and a return run the risk of missing out on strong performance and impairing their long-term investment success.
Timing the market is futile: The best and worst trading days happen close together
Sources: Vanguard calculations as of December 31, 2023, based on data from Refinitiv using the Standard & Poor’s 500 Price Index.
Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
The success of financial markets over the long term is not driven by short-term events, but rather by economic growth, interest rates, productivity, innovation, and dozens of other variables.
Focus on what you can control
We believe that investors are well-served by our Principles for Investing Success: Have clear, appropriate investment goals; keep a balanced and diversified mix of investments; minimize costs; and maintain perspective and long-term discipline. These principles are timeless—and especially useful in times such as these.
The bottom line: Stick to your long-term investment strategy.
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