As the election approaches it appears investors' concern mounts with every twist and turn of the presidential race.  It seems this nervousness is driven by the uncertainty surrounding the outcome of not only the presidential race but the House and Senate races as well. Historically, elections years have produced volatility, especially at the end of a President's second term; however that volatility doesn't necessarily lead to negative returns. LPL Research states that since 1948 the average S&P 500 return during an election year is 10.2%, excluding 2008.

Investors focus on the impact of the election on the market, while historically the market has been a good predictor of the outcome. According to LPL Research, in 82% of elections since 1944, stock market as measured by the S&P 500, direction from July 31 – October 31 has successfully predicted which party would win the presidential election. When stocks rise, voters feel optimistic about the economy, and the incumbent party wins. When equities fall, voters look for change and the challenging party wins. 

Now let's look at 3 potential outcomes outlined by Greg Valliere, chief political strategist for Potomac Research Group and a brief summary of their potential impact on the markets and the economy.

• Clinton win with a Republican Congress: The markets could like this scenario because a split government allows for checks and balances, so even if policy progress is slow it could create a sense of balance.
• Clinton win with a Democratic Congress:  This unilateral government could make markets nervous as it creates the risk of partisan policymaking without opposing viewpoints.
• Trump win: The unconventional Republican candidate might create uncertainty for the markets as there are many questions around the impact of potential policies, including: trade, challenge to the authority of the Federal Reserve, tax cuts, and immigration. 

Each candidate has vastly differing ideas about many issues, so the outcomes for both president and Congress are critical in evaluating the potential impact to the economy and stock market. Our role in managing your portfolio is to put political thoughts and feelings aside and look at things from an investment perspective.  One sector to watch closely is Healthcare.  Each candidate has a drastically different approach to improving healthcare. Regardless of the election's outcome it's possible that healthcare could look very different in the years to come.  This may present an opportunity for us to try to take advantage of those potential changes within the portfolios.

As the campaigns draw to a close every word each candidate says will be analyzed in detail. This could lead to more volatility as investors weigh the developments in the election race. This election cycle has been far from ordinary, but we feel that it's not a time to panic as once the election is behind us much of the uncertainty we have today appears to be gone.  It's not unusual to see markets rally into the end of an election year as results are digested and investors look for other factors (like economic data, and corporate earnings) to drive markets.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
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