For a lot of Americans, the upcoming election involves more than just political issues.

A significant number believe that the election results will greatly influence their financial situations, impacting their wealth, retirement plans, investments, expenditures, and savings for emergencies.

The prevailing thought is often this: “If my preferred candidates win, I could be wealthier, retire sooner, and spend more freely. If they lose, I might have to save more, work longer, and be more cautious with my spending.”

But are these concerns justified?

Generally speaking, they are not, particularly regarding how election results can influence stock market performance, which is crucial for retirement savings.

“The outcomes of elections have minimal to no effect on future investment returns,” explains Kevin Jestice, senior vice president of Nationwide Investment Management Group. “Markets usually trend upwards over time, regardless of political leadership.”

Despite this, a Harris Poll reveals that 55% of investors think that the results of next month’s presidential and congressional elections will significantly influence their retirement plans more than the market itself. This was derived from nearly 2,500 adult investors with at least $10,000 in financial assets and almost 600 advisors surveyed online for Nationwide between August 26 and September 13.

This belief has risen by 10 percentage points compared to last year, according to Nationwide.

Americans aren’t merely anxious; many are acting on their concerns. Over a quarter of investors who aren’t yet retired intend to invest more conservatively as the election approaches, and 18% are considering diversifying their investments, according to the Nationwide survey.

However, Jestice warns that investors might “see lower returns” over time if they choose to be overly cautious due to election anxieties.

Some individuals foresee even graver outcomes if candidates they oppose win. Around one-third predict a recession in the next year. Half anticipate a rise in the cost of living. Furthermore, 61% believe the presidential election result will have a “direct, immediate, and sustained effect” on stock market performance, according to a Nationwide report on the survey.

“The stock market has been achieving record highs,” expressed Cathy Outlaw, a Florida resident in her late 60s, in an email to YSL News. “Inflation is decreasing. Gas prices are stabilizing. Our finances are currently secure.” She added that if former President Trump were elected, it “would disturb all these circumstances.”

On the other hand, Nancy Torborg, also in her late 60s and living in Raleigh, North Carolina, shared with YSL News that “if Trump were to win, people would likely feel more optimistic about the economy.”

“Supporters of Trump might think that taxes will rise under Vice President Harris, along with increased federal regulations affecting consumers, or manufacturers passing on their costs to buyers.”

Experts indicate that many investors view their economic situations through a lens of worry rather than assessing actual market and economic fundamentals.

“Most of the financial survey results during an election year are driven by emotion rather than any concrete rationale,” stated Jamie Cox, managing partner at Harris Financial Group, an investment and financial planning firm.

He advises that “people should concentrate on corporate earnings and human creativity,” emphasizing that stock pricing is largely affected by company profits, which have consistently increased over time, regardless of political party in power.

Does the president impact the stock market?

Since 1960, the S&P 500 index has seen an average annual return of 12.5% under Democratic presidents, in contrast to 5.2% during Republican administrations, according to a Nationwide study. Nevertheless, Cox warns against attributing the difference solely to the party in the White House.

From 1926 to 2023, the benchmark index performed best — achieving an average annual increase of 16.6% — under a Democratic president with either a Republican or divided Congress, as found in a study by Retirement Researcher, an online resource. Cox explains that divided governments often mean fewer significant bills are passed, and markets typically prefer stability over new laws that could potentially raise taxes or create uncertainty.

Additionally, the S&P 500 performed well under unified Republican and Democratic governments during the same time frame, with average annual returns of 14.5% and 14%, respectively, as indicated in the research.

It appears that the political balance between the White House and Congress may not be as crucial as previously thought.

According to Jestice, the stock market has been more influenced by “fundamental economic conditions” than by which party is in power. “It would be an oversimplification to declare one party more favorable for the markets than the other.”

What role does social media play in politics?

For years, consumer confidence has generally been stronger among those whose favored candidate occupies the White House, as shown by the University of Michigan’s monthly consumer sentiment survey. However, a more polarized political climate, exacerbated by social media and the continuous news cycle, has intensified these divisions.

The connection between Americans’ political beliefs and their financial outlook is getting stronger.

“The surrounding environment has become more intense,” Cox mentioned.

According to a July online survey by Morning Consult for Empower, which included 2,200 adults, about 25% of Americans believe that the election results will influence “whether I become wealthy.” Additionally, 42% feel their financial situation will vary according to who emerges victorious.

Thirty percent of respondents said the presidential election winner will determine if they need to work longer, potentially shortening their retirement. Furthermore, 34% indicated it would affect their spending habits, while 41% plan to increase their emergency savings. Additionally, 23% expressed intentions to invest more in the stock market.

Both the Nationwide and Empower surveys did not specifically address Trump or Harris.

Cox noted that the election results could influence consumer confidence, which in turn would impact spending and the broader economy. However, Jestice added that with Americans divided in their political preferences, the effects usually balance each other out and don’t have a significant impact.

Moreover, the result of the election might lead to real changes in tax and other policies that could sway market movements and economic development. Nevertheless, both Cox and Jestice argue that such shifts are often less critical than company earnings or decisions from the Federal Reserve regarding interest rates. Investors should not rush their financial decisions.

“There’s ample time to respond,” Cox said.

Jestice advised: “Stay calm.”