Investing during general elections can be nerve-wracking. However, historical data shows that staying calm often leads to better outcomes. Let’s look at how different assets have performed over the last 100 years during these periods.
Historical Performance of Asset Classes
UK Equities
UK equities have seen ups and downs influenced by political events. For instance, they fell 66% during the Great Depression but rose 131% in the following recovery. Long-term trends remain positive, showing resilience despite political changes.
Global Equities
From 1926 to 2023, global equities have delivered an average annual return of around 12%, even through events like World War II and the 2008 financial crisis. Despite short-term volatility, the long-term growth has been robust.
Bonds
Government bonds are typically a safe haven during political uncertainty. In the 1970s, a period marked by high inflation, bonds provided stability compared to equities. They are seen as a lower-risk investment during turbulent times.
Property
UK property values have shown long-term growth, especially in urban areas. The average annual return is about 6%, with less volatility compared to equities. Despite political and economic challenges, property remains a solid investment.
Gold
Gold is a go-to during times of uncertainty, offering an average annual return of around 8%. It often spikes during crises, such as the 1970s oil crisis and the 2008 financial crisis, making it a good hedge against instability.
While cash is safe, it tends to underperform over the long term due to inflation. However, it remains important for liquidity, particularly during uncertain times. High inflation periods have shown cash losing purchasing power.
Strategies for Investing During Elections
Spread investments across different asset classes to mitigate risks. A balanced portfolio including equities, bonds, property, and gold can offer both stability and growth potential. Historical data supports the effectiveness of diversification.
Staying Informed
Keep updated on political developments, but avoid overreacting to short-term news. Historical trends suggest markets often recover from political shocks. Stay informed but avoid panic selling.
A long-term view helps weather short-term volatility. Despite political and economic crises over the past century, both UK and global equities have shown robust growth in the long run.
Consulting a financial advisor can provide personalised strategies tailored to your risk tolerance and financial goals. Advisors offer insights based on historical data and current conditions, helping you make informed decisions.
The Impact of Political Events
Investing during general elections and political uncertainty requires a calm, informed approach. Understanding historical performance and adopting strategies like diversification and a long-term perspective can help manage risks and seize opportunities. For personalised advice, contact me at ISJ Financial Planning. I am here to help you navigate your investment journey through all market conditions.
