The upcoming US presidential election between Hillary Clinton and Donald Trump is making a lot of people very nervous and anxious. Working at an investment company that specialises in US equities and bonds, one of the most common concerns I hear is “What is the election going to do to the stock market?”

People are worried that if the candidate they dislike becomes president, it will be devastating for the markets and their investments. They want to know what precautionary measures they should take to protect themselves and their money.

This is not a political analysis and I will not attempt to predict who will win the election or decipher who is the better candidate. The fact is though, that President Obama leaving the White House after eight years is going to create a void and uncertainty — two factors that the stock market does not like.

If you listen to the news and read reports from the pundits, one thing is for sure: you will hear vastly contrasting stories.

According to Gregg Fisher of Gerstein Fisher, “There’s no empirical evidence to suggest that who the president is, whether Republican or Democrat, should cause you to want to deviate from your investment strategy.” The fact is that stocks generally rise over time, regardless of who is in the Oval Office.

Whereas, in its Primaries, caucuses and elections- oh my report, MFS Investment Management postulates that more important than which party occupies the White House is the party that controls Congress. Based on historical data from 1961-2010, a combination of a Democrat President and a Republican Congress have produced the highest stock market returns.

While there is no ‘one right answer’ or best action to take to prepare for the upcoming elections, there are a few different strategies and viewpoints.

As crazy as this sounds, one common strategy adopted by investors is to do… nothing. As stated before, there is a common belief that the outcome of the election will not have any significant long-term impact on the stock market.

At SSL, we preach investing for the future and not being overly concerned with short- term volatility which investors will be subjected to. In keeping with our investment philosophy, by focusing on best of breed blue chip securities, short-term volatility and a fall in prices may present a good buying opportunity to acquire investments at discounted prices.

This view to do nothing stems from the belief that both candidates have the same objectives, for the most part, but differ on how to achieve them. For example, both candidates want to improve health care, make the US a safer country, strengthen foreign relations, and, most importantly — for the sake of this article — create more jobs and stimulate the economy by putting more money in everyone’s pockets.

A second, more defensive strategy that can be adopted is to keep a higher level of liquidity going into 2017. With the S&P 500 trading near the all-time high, and bond prices increasing significantly which result in lower yields, now may be the right time to reposition into more liquid assets such as preference shares and top-performing dividend stocks. This will not only add income-stabilising securities to the portfolio, but also ensure that you, the client, will be able to quickly react to any changes in market conditions.

The key to your investing success is understanding that your emotional reaction to the election, not who actually wins, it is what truly matters. Do not buy and sell based on your convictions about a candidate’s policies, but rather keep in mind that the S&P 500 has ended the year up in more than 70 per cent of all calendar years since 1926.

The important consideration is to stay focused on the big picture. The best way to prepare for any market volatility associated with the election is to take a long-term approach and have a diversified portfolio.

For help with constructing such a portfolio, speak with a member of our sales or customer service team today!

Matthew Williams, sales supervisor, managed products at Stocks & Securities Ltd.