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Ask Matt: Will the election sink my portfolio?

Matt Krantz
USA TODAY
A woman holds up a sign for Democratic presidential candidate Hillary Clinton during a rally for Republican presidential candidate Donald Trump, Thursday, June 2, 2016, in San Jose, Calif.

Q: Will the election sink my portfolio? 

A: There’s nothing like a heated political contest to stoke worries about perceived problems with the nation. But don’t let rhetoric cause you to hurt your stock returns.

Presidential debates can often fuel worries about the future. Some investors might think they need to adjust their portfolios. But history confirms for stock investors at least, the politicians are full of mostly hot air. Election years are usually bullish for stocks, says Stock Trader’s Almanac. Stocks have only fallen 5% or more in six election years since 1896. It also turns out that stocks tend to set their bottoms in the two years following a presidential election no matter who wins, Stock Trader’s Almanac says. It’s more evidence that if you’re looking to bail on stocks because of the election, you could very well be making a long-term mistake you’ll regret five years from now. There are ways to protect portfolios from domestic drama. It’s a good idea for most to own shares of companies located outside the United States, whether it’s an election year or not. Emerging markets shares and European shares have been lagging U.S. stocks, but they could provide value as U.S. stocks’ valuations rise.

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.

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