January 2025 Blog Newsletter
January Captain’s Log
What Can I Expect from the Market the YearFollowing the Presidential Election?
The stock market is often a source of curiosity and concern during and afterpresidential election years. Many investors wonder if political transitions or policychanges will significantly impact their portfolios. While countless factors influencemarket performance—many unrelated to politics—historical trends can offer someinsights into how the market has behaved during different years of thepresidential cycle. However, it’s essential to remember that market performanceshould never overshadow the importance of your personal financial goals and thepurpose behind your money.
A vast number of factors can influence the performance of the stock market inany given year, many of which have little or nothing to do with the president orCongress. However, historical data suggests a potential pattern: stock prices maytend to increase as the sitting president nears the next election.
Market analyses of past decades reveal that, on average, the third year of apresidential term has often delivered the strongest stock market gains. The S&P500—a broad index of U.S. stocks—has historically exhibited the following averagereturns during each year of the presidential cycle:
First year: +10.3%
Second year: +3.3%
Third year: +13.5%
Fourth year: +7.5%
Since the 1930s, the S&P 500’s average annual return has been around 10.2%.
While returns in the first year of a presidential term are close to this average, and
the second year tends to lag slightly, the third year often delivers a significant
“third-year bump.”
Yet, averages alone don’t confirm whether this trend consistently holds.
Frequency also plays a role. Historically, the stock market has experienced gains in
about two-thirds of calendar years. During the third year of the presidential cycle,
however, gains have occurred more frequently—about 78% of the time. In
contrast, the first and second years have seen gains less often.
Exceptions and Examples
Donald Trump’s presidency broke from the predicted first-year market slump. In
his first year, the stock market surged due to tax reforms, while his second year
aligned more closely with historical patterns, showing a market decline. His third
year delivered particularly strong returns, consistent with the trend of higher gains
during this phase of the cycle.
The Biden administration followed a pattern closer to historical averages. His first
year saw robust gains, followed by a market decline in the second year. The third
year brought significant market increases, further supporting the idea of a third-
year boost.
Focusing on What Matters Most
While historical trends can provide context, they are far from guarantees of future
performance. More importantly, market performance—whether strong or weak—
should not dictate your financial decisions. The purpose of your money and how it
aligns with your goals is far more critical. Whether you’re saving for retirement,
funding your child’s education, or building a legacy for future generations, your
financial strategy should prioritize your unique goals over short-term market
trends.
By staying focused on your personal financial objectives and maintaining a
disciplined, long-term approach, you can achieve success regardless of the
market’s behavior. Remember, the ultimate value of your money isn’t just in how it
performs but in how well it supports the life you want to live and the purposes you
want to live life for.
Happy New Year and here’s to a great 2025!
Adam
Are You Prepared for theUnexpected? Ensuring YourFamily’s Financial Security
Life has a way of throwing curveballs when we least expect them. Whether it’s anunexpected medical expense, job loss, or a sudden change in family dynamics,being financially prepared can make all the difference. No one can predict when afinancial emergency might arise, but having a plan in place ensures you’re readyto face challenges without derailing your family’s long-term security.
Key Steps to Get Prepared
Build an Emergency Fund
An emergency fund acts as a financial safety net, giving you a cushion to coverunplanned expenses. Aim to save three to six months’ worth of living expenses ina separate, easily accessible account. For a more structured approach, considerthe 50-30-20 rule: allocate 50% of your income for necessities, 30% for wants, and20% for savings. From this savings portion, direct a part specifically towardbuilding and maintaining your emergency fund.
Review Your Insurance Coverage
Insurance is your first line of defense against life’s unexpected challenges.Whether it’s a sudden illness, an accident, or the loss of a primary breadwinner,having the right coverage can protect your family from financial hardship.Regularly reviewing and updating your policies ensures they align with yourfamily’s needs and evolving financial goals.
Create or Update Your Estate Plan
Estate planning isn’t just for the wealthy—it’s for anyone who wants to make life alittle easier for their loved ones when it matters most. An estate plan spells outwhat should happen to your assets and who will care for your kids if somethinghappens to you. Life changes like getting married, having kids, or buying a homeare perfect times to update your plan. By keeping it current, you’ll reduceconfusion, avoid family disagreements, and give everyone peace of mind.
Diversify Your Investments
Think of your investments like a well-balanced meal—you need variety to stayhealthy. Diversifying your investments means spreading your money acrossdifferent types of assets, like stocks, bonds, real estate, or mutual funds. This way,if one type isn’t doing great, others can help keep your finances steady.
Communicate with Your Family
Being financially prepared isn’t just about saving and planning—it’s aboutkeeping everyone in the loop. Talk with your family about important topics likewhere to find key documents and what to do in an emergency. It’s also a greatopportunity to teach financial literacy, so everyone feels confident makingmoney decisions.
Preparing for the unexpected doesn’t happen overnight, but every small stepadds up. Let Anchor Wealth help you navigate the journey. Contact us today toschedule a consultation and take the first step toward ensuring your family’sfinancial future is secure—no matter what life brings.
By Shane Stuart, Wealth Advisor
Adam’s Nightstand
I recently started reading The 5AM Club: Own Your Morning, Elevate Your Life by Robin Sharma. This book reminds me of The Miracle Morning by Hal Elrod, which I really enjoyed reading. That bookhelped me integrate many beneficial habits into my life years ago, so I couldn’twait to dive into The 5AM Club.
Since I’ve just started reading, I suspect there’s a lot of overlap between thesetwo books. However, revisiting similar material presented in a different way canbe incredibly helpful. It allows me to either reestablish habits I’ve let slip or see anexisting habit from a new perspective—one that might inspire me to take it to anentirely new level!
In today’s fast-paced world, building a structure in my life that allows me toprioritize quiet time for what truly matters not only benefits me but also thosearound me.
Remember, it’s unrealistic to incorporate every idea from a book like this intoyour life all at once. Instead, focus on taking action on one or two key concepts.Over time, those small, gradual improvements will compound into massivebenefits.
Happy reading!
Eat, Dink and Be Merry
On Saturday, December 14th, our team, spouses, and guests gathered for the AWM Team Christmas Party.
After a wonderful dinner at The Top at the Embassy Suites in Rockford, the team proceeded to Victory Pickleball in Loves Park for a team Pickleball Tournament.
The competition for the coveted AWM tournament trophies and prizes was fierce. Chris Perry and Dan Leonard took first place, while Cherry Johnson and her husband Mike finished last, receiving the Biggest Loser trophies.
Angie Whittenberg was awarded The Biggest Pickle Award for always ending up in the kitchen. Melissa’s guest, Paul, received the Best Play of
the Night Award for a sliding dive that saved a rally.
It was a night filled with laughs and memories made as a team.