Elections come and go. Results last a lifetime.€¦ · Barack Obama : vs. John McCain Barack Obama...

A review of U.S. presidential elections

Elections come and go. Results last a lifetime.

There have always been tumultuous events.

The current economic and political challenges may seem unprecedented, but a look back

shows that controversy and uncertainty have surrounded every campaign.

CLOSED

Labor market struggles

Market declines and recessions

CLOSED

Businesses going bankrupt

CLOSED

Weather-related calamities

CLOSED

Overseas conflict and war

CLOSED

Civil unrest and protest

1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Jimmy Carter vs.

Gerald Ford

Ronald Reagan vs.

Jimmy Carter

Ronald Reagan vs.

Walter Mondale

George H.W. Bush

vs. Michael Dukakis

Bill Clinton vs.

George H.W. Bush

Bill Clinton vs.

Bob Dole

George W. Bush vs.

Al Gore

George W. Bush vs.

John Kerry

Barack Obama vs.

John McCain

Barack Obama vs.

Mitt Romney

Donald Trumpvs.

Hillary Clinton

New York City threatens

bankruptcy

Economy mired in recession

Iran hostage crisis drags on

Olympic boycott underscores

Cold War divide

Budget deficits rising rapidly

Stock market slides over 30%

in less than four months

Savings and loan crisis

reaches apex

Iran-Contra indictments

Los Angeles riots highlight racial

tension

Pending NAFTA ratification

creates anxiety

19 American servicemen

killed in Saudi Arabia bombing

UN arms inspectors repeatedly

thwarted in Iraq

Tech bubble bursts; stock

markets plummet

Attack on USS Cole heightens

terrorism concerns

Oil prices soar

Ongoing wars in Iraq and

Afghanistan

Subprime mortgage crisis

Lehman Brothers collapse; world

markets fall

High-stakes negotiations lead to a deal to avert the “fiscal cliff”

Superstorm Sandy kills 268 people and causes $68

billion in damage

Rise of populism affects elections around the world

The U.K. votes to leave the European

Union

Set your sights on the long term Investor doubts may seem especially prevalent during presidential election years when campaigns spotlight the country’s challenges. Yet even with election year rhetoric amplifying the negative, it’s important to focus on your vision for the future. Keep in mind the following:

• Successful long-term investors stay the course and rely on time rather than timing.

• Investment success has depended more on the strength and resilience of the American economy than on which candidate or party holds office.

• The experience and time-tested process of your investment manager can be an important contributor to your long-term investment success.

“ The only limit to

our realization of

tomorrow will be our

doubts of today.”

— Franklin D. Roosevelt

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

1936 1940 1944 1948 1952 1956 1960 1964 1968 1972

Franklin D. Roosevelt

vs. Alf Landon


vs. Wendell Willkie


vs. Thomas Dewey

Harry Truman vs.

Thomas Dewey

Dwight Eisenhower

vs. Adlai Stevenson

Dwight Eisenhower

vs. Adlai Stevenson

John F. Kennedy vs.

Richard Nixon

Lyndon Johnson vs.

Barry Goldwater

Richard Nixon vs.

Hubert Humphrey

Richard Nixon vs.

George McGovern

U.S. remains in grip of

Depression

Nazi rise troubles Europe

Isolationism vs. engagement

hotly debated

Germany menaces Europe;

France falls

FDR’s health in question

Potential Post-War impact of

New Deal debated

Civil rights tension boils over at convention

Berlin blockade accelerates Cold War

U.S. detonates first hydrogen

bomb

Attempts at Korean War

truce fail

Mideast trouble as Egypt seizes

Suez Canal

Soviets invade Hungary

Cuba nationalizes U.S. assets

American U-2 spy plane shot down in Soviet

airspace

Civil Rights Act passes after

lengthy filibuster

Gulf of Tonkin signals Vietnam

involvement

Vietnam protests and civil rights

issues roil conventions

RFK and Martin Luther King Jr. assassinated

Watergate scandal surfaces

Vietnam War drags on

Democrat

Republican

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20181935 1936 1937 1938 1939 1940 1941 1942 19431934Year endedDec. 31 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1999 20001998 200620052004200320022001

8,000

10,000

100,000

80,000

60,000

40,000

20,000

200,000

400,000

600,000

800,000

1,000,000

10,000,000

100,000,000

$200,000,000

2,000,000

4,000,000

6,000,000

8,000,000

20,000,000

40,000,000

60,000,000

80,000,000

Consumer Price Index (inflation)$190,328Average annualreturn: 3.5%

Stock market with dividends reinvested$57,809,008Average annualreturn: 10.7%

Stock market with dividends excluded$2,482,030Average annualreturn: 6.7%

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Averageannual totalreturn for 85 years:

+12.1%

Original investment$10,000

ICA with dividends excluded$12,749,3083

Average annualreturn: 8.8%

ICA with dividendsreinvested$168,662,5472

Average annualreturn: 12.1%

Capital value ($ in 000)

Total value ($ in 000)

Value added by reinvestmentof dividends

Dividendsexcluded: — — $0.5 1.1 0.2 0.6 0.9 1.2 1.1 1.0 1.1 1.0 1.4 1.8 2.0 1.9 2.1 2.2 2.2 2.3 2.4 2.9 3.1 3.3 3.4 3.6 4.0 4.1 4.3 4.5 4.9 5.4 6.7 7.8 9.4 10.2 10.5 10.8 11.0 11.8 17.4 15.8 14.3 14.8 16.0 19.3 24.1 29.1 34.7 33.6 35.1 36.9 41.8 52.9 60.3 67.6 71.2 55.2 60.0 61.4 65.0 70.3 74.0 78.0 88.1 97.4 109.3 115.2 116.1 118.0 120.0 156.6 174.5 166.9 179.3 154.7 153.1 158.2 194.7 175.4 215.2 201.3 236.8 243.5 280.9

Value atyear-end: $12.6 23.0 33.0 19.5 24.7 24.3 22.8 20.0 22.2 28.6 34.2 45.7 43.3 41.9 40.2 42.0 48.1 54.5 58.9 56.9 86.1 105.1 113.4 97.0 136.6 152.4 155.4 187.2 158.2 189.8 216.0 268.6 264.9 333.8 380.9 330.8 328.5 373.7 421.8 339.8 262.5 339.6 425.6 400.2 443.2 508.7 590.7 567.9 717.5 828.8 847.5 1,089.4 1,285.1 1,307.2 1,421.2 1,769.8 1,712.2 2,109.7 2,198.0 2,393.1 2,335.9 2,977.9 3,479.7 4,438.7 5,366.7 6,160.7 6,297.2 5,903.3 4,949.0 6,124.9 6,607.4 6,911.7 7,841.4 8,151.6 5,186.6 6,421.4 6,965.8 6,701.0 7,564.5 9,842.9 10,833.0 10,494.9 11,797.3 13,889.7 12,749.3

Dividendsreinvested: — — $0.5 1.1 0.2 0.6 1.0 1.4 1.3 1.2 1.4 1.4 2.0 2.7 3.0 3.0 3.5 3.8 4.0 4.5 4.7 5.9 6.5 7.2 7.6 8.2 9.5 9.9 10.7 11.4 12.7 14.5 18.4 21.8 26.9 29.9 32.0 33.9 35.7 39.4 60.6 58.3 55.1 59.1 66.4 82.8 107.9 136.7 171.9 175.1 190.9 209.5 245.9 321.9 382.2 446.6 489.4 394.2 440.8 463.4 503.8 559.8 604.2 651.1 748.4 842.1 961.6 1,032.1 1,060.8 1,102.9 1,144.7 1,524.8 1,739.1 1,700.6 1,867.6 1,660.7 1,687.2 1,784.4 2,249.5 2,076.7 2,597.8 2,478.7 2,973.7 3,119.8 3,667.5

Value atyear-end: $12.6 23.0 33.6 20.7 26.5 26.8 26.2 24.3 28.4 37.8 46.6 63.9 62.5 63.2 63.5 69.6 83.5 98.6 110.8 111.5 174.3 218.9 242.9 214.4 310.8 355.5 372.2 458.8 398.7 490.7 571.4 726.6 734.9 948.7 1,111.4 994.3 1,022.0 1,197.9 1,390.0 1,158.1 951.9 1,290.7 1,675.3 1,634.8 1,878.0 2,241.5 2,721.8 2,750.1 3,684.7 4,434.7 4,738.0 6,330.1 7,718.5 8,151.2 9,253.0 11,993.0 12,094.2 15,328.8 16,426.2 18,363.8 18,421.7 24,102.1 28,812.0 37,459.6 46,125.3 53,847.6 56,003.0 53,519.3 45,847.5 58,000.6 63,776.6 68,266.4 79,273.9 84,120.2 55,010.2 70,138.5 77,900.8 76,697.0 88,863.1 117,918.7 132,438.8 130,768.7 150,098.6 180,027.6 168,662.5

Totalreturn +25.6% +83.4 +46.0 –38.3 +27.8 +1.0 –2.3 –7.2 +16.9 +33.0 +23.5 +37.0 –2.2 +1.1 +0.5 +9.6 +20.0 +18.0 +12.4 +0.6 +56.4 +25.6 +10.9 –11.7 +45.0 +14.4 +4.7 +23.3 –13.1 +23.1 +16.4 +27.1 +1.1 +29.1 +17.2 –10.5 +2.8 +17.2 +16.0 –16.7 –17.8 +35.6 +29.8 –2.4 +14.9 +19.4 +21.4 +1.0 +34.0 +20.4 +6.8 +33.6 +21.9 +5.6 +13.5 +29.6 +0.8 +26.7 +7.2 +11.8 +0.3 +30.8 +19.5 +30.0 +23.1 +16.7 +4.0 –4.4 –14.3 +26.5 +10.0 +7.0 +16.1 +6.1 –34.6 +27.5 +11.1 –1.5 +15.9 +32.7 +12.3 –1.3 +14.8 +19.9 –6.3

Average annual return:

10.0%

1940Franklin Roosevelt


11.5%

1944Franklin Roosevelt


13.0%

1948Harry

Truman

$10,000 investment 10 years later

Dividends reinvested during period


16.7%

$46,825

1952Dwight

Eisenhower


12.8%

$33,264

1956Dwight

Eisenhower


10.8%

$28,002

1960John F.

Kennedy


9.0%

$23,598

1964Lyndon

Johnson


18.3%

$53,508

1980RonaldReagan


15.3%

$41,411

1984RonaldReagan


16.5%

$45,955

1988George H.W.

Bush


13.3%

$34,912

1992Bill

Clinton


11.0%

$28,319

1996Bill

Clinton


2.7%

$13,025

2000George W.

Bush

$6,492

$6,942

$7,416

$6,565

$33,980

$29,570

$25,991

$5,076$4,353

$4,190

$10,170 $7,656 $5,669 $4,072 $3,671 $2,391


7.4%

$20,333

2004George W.

Bush

$2,905

2008Barack Obama


17.2%

$49,044

1976JimmyCarter

$9,300


8.7%

$22,958

1972RichardNixon

$5,596


5.6%

$17,232

1968RichardNixon

$4,314


7.9%

$27,723

$4,156


10.7%

19361

Franklin Roosevelt

$2,665

$21,404

Sources: Capital Group, Standard & Poor’s. Dividend calculations sourced from Refinitiv InvestmentView+. Class F-2 shares were first offered on August 1, 2008. Class F-2 share results prior to the date of first sale are hypothetical based on Class A share results without a sales charge, adjusted for estimated annual expenses. The results shown are before taxes on fund distributions and sale of fund shares. Past results are not predictive of results in future periods. Results for other share classes may differ.

Expense ratio was 0.39% as of the fund’s prospectus available at the time of publication.When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would be lower. Please see capitalgroup.com for more information.

Here are ICA’s average annual total returns on a $1,000 investment with all distributions reinvested for periods ended September 30, 2019: 1 year 5 years 10 yearsClass F-2 shares –0.32% 8.28% 11.31%

Figures shown are past results for Class F-2 shares with all distributions reinvested and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit capitalgroup.com.

The stock market is represented by Standard & Poor’s 500 Composite Index, a market capitalization-weighted index based on the results of approximately 500 widely held common stocks. The index is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index.

The Investment Company of America® 21 elections and counting

1 Investment results shown are for 10-year periods beginning on January 1 of the year shown. 2 Includes dividends of $45,282,202, and capital gain distributions of $95,798,465, reinvested in the years 1936–2018.3 Includes reinvested capital gains of $9,258,017, but does not reflect income dividends of $4,562,617 taken in cash.

As you can see in the mountain chart below, a hypothetical $10,000 investment in The Investment Company of America has grown steadily and significantly over the fund’s 85-year history.

Additionally, a hypothetical $10,000 investment in ICA made at the beginning of an election year was always larger 10 years down the road.

Lit. No. MFF2BR-005-1119P Litho in USA CGD/CIP/10204-S75466 ©2019 Capital Group. All rights reserved. Printed on recycled paper

Red, blue and youBeliefs about which political party is best for the markets might discourage you from investing. But as you can see from the chart below, whether a Republican or a Democrat claims victory hasn’t been a deciding factor in how a $10,000 investment made at the beginning of an election year looked 10 years down the road.

Source: Capital Group.

Each 10-year period begins on January 1 of the first year shown and ends on December 31 of the final year shown. For example, the first period listed (1936–1945) covers 1/1/36 through 12/31/45.

Class F-2 shares were first offered on August 1, 2008. Class F-2 share results prior to the date of first sale are hypothetical based on Class A share results without a sales charge, adjusted for estimated annual expenses. The results shown are before taxes on fund distributions and sale of fund shares. Past results are not predictive of results in future periods. Results for other share classes may differ.

Growth of a hypothetical $10,000 investment made at the beginning of an election year

2008–2017

2004–2013

2000–2009

1996–2005

1992–2001

1988–1997

1984–1993

1980–1989

1976–1985

1972–1981

1968–1977

1964–1973

1960–1969

1956–1965

1952–1961

1948–1957

1944–1953

1940–1949

1936–1945 $27,723

$25,991

$29,570

$33,980

$46,825

$33,264

$28,002

$23,598

$17,232

$22,958

$49,044

$53,508

$41,411

$45,955

$34,912

$28,319

$13,025

$20,333

$21,404

$10,000 initial investment

In 19 of the 19 10-year periods you had a positive return.

In 17 of the 19 10-year periods you doubled your investment.

ICA total ending value 10 years after the start of a Republican presidency

ICA total ending value 10 years after the start of a Democratic presidency

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectus and summary prospectus, which can be obtained from a financial professional and should be read carefully before investing.If used after December 31, 2019, this brochure must be accompanied by a current American Funds quarterly statistical update.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

American Funds Distributors, Inc., member FINRA.

How to survive the uncertainty and invest with confidence

Guide to investing in an election year

How to invest with confidence in an election year

Presidential elections can be divisive and unsettling. At times, the fate of the world seems to hang in the balance. But when it comes to investing, do elections really matter all that much?

U.S. voters will have their say on November 3, but by maintaining a long-term focus, investors can position themselves for a brighter future regardless of the outcome at the voting booth. In fact, overreacting to short-term volatility during election cycles can be detrimental to investment returns.

In this guide, we address top advisor questions about investing in an election year, drawing insights from our analysis of over 85 years of investment data across 22 election cycles.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.Past results are not predictive of results in the future.

U.S. stocks have trended up regardless of whether a Republican or Democrat won the White House.

A $1,000 investment in the S&P 500 Index when FDR became president in 1933 would have been worth over $14 million today. During that time there have been seven Republican and seven Democratic presidents.

Primary season tends to be volatile, but markets have bounced back strongly afterward.

Stocks have returned 10.2% in the 12 months following primaries, compared to 5.8% in similar periods of non-election years.

Investors often get nervous and move into cash during election years.

Net asset flows into money market funds have been more than three times higher in election years than in non-election years.

But staying on the sidelines has rarely paid off. It’s time, not timing, that matters most.

Stocks have had negative returns in only two of the last 20 election years (2000, 2008), and both declines were largely attributed to asset price bubbles rather than politics.

Here’s what we learned:

GUIDE TO INVESTING IN AN ELECTION YEAR

– 2 –

To download this full guide, go to www.guidetoelections.com

1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018

Democratic presidency

Republican presidency

$1,000

$1,000,000

$10,000,000

$10,000

$100,000

Which political party has been better for investors?

Investing during an election year can be tough on the nerves, and 2020 promises to be no different. Indeed, politics can bring out strong emotions and biases, but investors would be wise to tune out the noise and focus on the long term.

That’s because elections have, historically speaking, made essentially no difference when it comes to long-term investment returns.

What should matter more to investors is staying invested. A $1,000 investment in the S&P 500 made when Franklin D. Roosevelt took office would have been worth over $14 million today. During this time there have been seven Democratic and seven Republican presidents.

Current economic and political challenges may seem unprecedented — political gridlock, the coronavirus outbreak and rising tensions around the globe — but a look at past election cycles shows that controversy and uncertainty have surrounded every campaign. And in each case the market has continued to be resilient over time. Successful investors stay the course and rely on time in the market rather than timing the market.

Bottom line: U.S. stocks have trended up regardless of whether a Democrat or Republican won the White House.

sources: Morningstar, Standard & Poor‘s. As of 12/31/19. Dates of party control are based on inauguration dates. Values are based on total returns in USD. Shown on a logarithmic scale.

Growth of a hypothetical $1,000 investment in S&P 500 Index


– 3 –

0

12%

6

Election day

Election years

Non-election years

Jan Mar Jul Sep Nov Jan Mar MayMay

But markets have tended to bounceback and return to an upward trajectory after primaries end.

PRIMARIES AFTER PRIMARIESThe first five months of election yearshave had lower average returns and higher volatility.

What typically happens to the stock market during election years?

Markets hate uncertainty, and what’s more uncertain than primary season of an election year? With so many candidates on the campaign trail — 14 Democrats were still running at the start of 2020 — the range of outcomes can feel daunting.

But the volatility is often short-lived. After the primaries are over and each party has selected its candidate, markets have tended to return to their normal upward trajectory.

Patient investors who stay the course have often been rewarded. Since 1932, stocks have gained an average of 10.2% in the 12 months following the conclusion of the primaries (using May 31 as a proxy) compared to just 5.8% in similar periods of non-election years.

But keep in mind, these are just averages. Investors shouldn’t try to time an entry point into the market. Instead, a long-term approach can help investors withstand volatility and feel confident that markets have tended to move higher over time, even in election years.

Bottom line: Primary season tends to be volatile, but markets have bounced back strongly thereafter.

sources: Capital Group, RIMES, Standard & Poor‘s. Includes all daily price returns from 1/1/32–12/31/19. Non-election years exclude all years with either a presidential or midterm elections.

S&P 500 Index average cumulative returns since 1932


– 4 –

0

20

40

60

80

100

120%

2014 2015 2016 2017 2018 2019

Periods when health carelagged the S&P 500 by

more than 8%

S&P 500

Health care

2016 Election cycle 2020 Election cycle2018 Midterm cycle

Which sectors have done best in election years?

It‘d be great if there were go-to sectors to invest in every election year, but unfortunately investing isn’t that simple. Every election cycle brings its own parade of candidates with their own policy agendas, so market winners and losers are hard to predict.

This time, it’s the health care sector that’s in the spotlight. Heated rhetoric over drug pricing has put pressure on many stocks across the pharmaceutical and managed care industries.

Does that mean you should avoid this sector altogether? Not according to Rob Lovelace, an equity portfolio manager with 34 years of experience investing through many election cycles. “When everyone is worried that a new government policy is going to come along and destroy a sector, that concern is

usually overblown,” Lovelace says. “Companies with good drugs that are really helping people will be able to get into the market, and they will get paid for it.”

Health care stocks rallied after the campaign spotlight of the 2016 presidential and 2018 midterm election cycles faded away. And it was the top-returning sector in 4Q19 after being the worst for the first nine months of the year. Other sectors have had similar post-election rallies in the past. This can create buying opportunities for investors with a contrarian point of view and the ability to withstand short-term volatility.

Bottom line: Election year volatility can create buying opportunities for long-term investors.

sources: RIMES, Standard & Poor‘s. Includes periods from 12/31/13–12/31/19. Highlighted periods reflect when the health care sector lagged the S&P 500, in part due to negative sentiment caused by policy proposals during election campaigns. All returns in USD.

Cumulative returns of S&P 500 and S&P 500 Health Care


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Equity funds Money market funds

0

20

40

60

80

100

120

140

160

$180B

Year 1 Year 2 Year 3 Year 4

Presidentialelection year

What mistakes do investors often make in election years?

If you’re nervous about the markets in 2020, you’re not alone. Presidential candidates often draw attention to the country’s problems, and campaigns tend to amplify negative messages. So it’s no wonder that investors may start feeling a little pessimistic too. This can become a problem if they allow their mood to affect their money.

History shows that investors have poured into money market funds — traditionally one of the lowest risk investment vehicles — much more frequently leading up to elections. By contrast, equity funds have seen the highest net inflows in the year immediately after an election. This trend holds true even for international funds.

This suggests that investors want to minimize risk during election years and wait until after uncertainty has subsided to revisit riskier assets like stocks.

But market timing is rarely a winning long-term investment strategy, and it can pose a major problem for portfolio returns. On the next page, we’ll take a closer look at how it could negatively impact investor wealth.

Bottom line: Investors often get nervous and move to cash in election years, but that’s rarely a winning strategy.

source: Morningstar. Values based on USD. Equity funds include U.S. and international equity funds.

Average net fund flows by year of presidential term (1992–2019)


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Investor strategy Average ending value after four-year holding period

$10K

$10K

$10K

$15,866

$15,729

$14,914

Best outcome Worst outcome

14/22cycles

6/22cycles

5/22cycles

0/22cycles

3/22cycles

16/22cycles

This investor isn’t concerned about election uncertainty and invests the full$10K on January 1 of the election year.

FULLY INVESTED

Similar to a 401(k) retirement plan, thisinvestor invests $1K in each of the first 10 months of the election year.

CONSISTENT CONTRIBUTIONS

Nervous about how elections affect markets, this investor waits until January 1 after the election results to invest the full $10K.

SITTING ON THE SIDELINES

What have been the best ways to invest in election years?

Spoiler alert: The best way to invest in an election year has rarely been by staying on the sidelines.

To verify this, we looked at three hypothetical investors, each with a different investment approach. We then calculated the ending value of each of their portfolios over the last 22 election cycles, assuming a four-year holding period.

The investor who stayed on the sidelines had the worst outcome 16 times and only had the best outcome three times. Meanwhile, investors that were fully invested or made monthly contributions (like a 401(k) investor) during election years came out on top. These investors had higher average portfolio balances over the full period and more frequently outpaced the investor who stayed in cash longer.

Sticking with a sound long-term investment plan based on individual investment objectives is usually the best course of action. Whether that strategy is to be fully invested throughout the year or to consistently invest through a vehicle such as a 401(k) plan, the bottom line is that investors should avoid market timing around politics. As is often the case with investing, the key is to put aside short-term noise and focus on long-term goals.

Bottom line: Staying on the sidelines has rarely paid off. It’s time, not timing, that matters most.

sources: Capital Group, Morningstar, Standard & Poor’s. The three hypothetical investors each have $10K to invest during an election cycle and are invested in a combination of equities and cash at all times. fully invested is always fully invested in equities. consistent contributions starts with $1K in equity and $9K in cash. At the start of each of the next nine months, this investor reduces cash by $1K and makes a $1K contribution to equities, after which they will have made the full $10K contribution to equities. sitting on the sidelines is entirely invested in cash during the first year. At the start of the second year, this investor reduces cash by $10K and makes a $10K contribution to equities. S&P 500 Index used for equity returns, and reflects the reinvestment of dividends. Ibbotson SBBI US 30-Day Treasury Bill Total Return Index used as a proxy for cash returns, and reflects the reinvestment of interest. Returns and portfolio values are calculated monthly and in USD. Analysis starts on January 1 of each election year and reflects a four-year holding period.

Three hypothetical $10K investment strategies during an election cycleAnalysis of 22 election cycles since 1932


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Key takeaways

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

©2020 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Standard & Poor’s 500 Composite Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2020 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC.

Standard & Poor’s 500 Composite Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks. The S&P 500® Health Care comprises those companies included in the S&P 500 that are classified as members of the GICS® health care sector.

Market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

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Election results have had very little impact on long-term investors.

Investors often sit on the sidelines during election years out of fear and uncertainty, but that’s rarely a winning strategy.

Markets have been more volatile during primary season, but tended to rise strongly thereafter.

Investors who were fully invested or made monthly investments did better than those who stayed in cash.

History shows that markets have risen whether a Republican or Democrat has been in office.

Net asset flows into money market funds have been more than three times higher in election years than in non-election years.

It’s important to stay the course through primary season to benefit from any potential rally once the final candidates and eventual winner emerge.

The key is to avoid trying to time markets around politics.

To download this full guide, go to www.guidetoelections.com

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