Projecting calm during the election storm

Tom Brown, Senior Consultant at Bladonmore, looks at how investors could react during election season and what that means for communications professionals.

Sixty-seven million viewers tuned in for the feisty September 10th faceoff between Democratic presidential candidate, Kamala Harris, and Republican candidate, Donald Trump – and this doesn’t include individuals who watched the 90-minute contest on streaming platforms, social media, or news websites. This massive viewership is but one of many signs of the enormous attention being paid to the US presidential election.

For Investor Relations Officers (IROs) with a large cadre of US investors, telling your story in the midst of the ongoing election circus can be challenging. Even though history suggests the outcome of a US presidential election has only a slight impact on markets, many retail investors believe otherwise.

What’s more, research shows that retail investors are dialed into this election in a way that is worth noting. In a June sentiment survey, Betterment, a Manhattan-based digital financial advisor, found that 93% of 1,200 investor participants had a baseline understanding of the upcoming election, with 63% self-reporting as having ‘advanced knowledge.’

Tellingly, a majority (57%) of retail investors in the survey by Betterment said that they were anxious about the upcoming election. Meanwhile, a whopping 40% said that they expect to move or pull investments from the market based on the election outcome.

Frame your communications with context

‘Don’t just do something; stand there’ – an old investing axiom – should be the mantra of this election cycle, says Dan Kemp, Global Chief Investment Manager for Morningstar. Even if staying the course is wise advice, he acknowledges that in times of uncertainty, investors attempt to predict the future and then change their investments accordingly.

The right strategy may be to do nothing, but for IROs crafting a retail-investor communications strategy, addressing the upcoming presidential election is a good idea because of the free-floating anxiety out there.

What matters most is putting the emotion of the moment in context. It’s worth pointing out, for instance, that while short-term volatility is normal, election outcomes rarely have more than minimal impact on markets over the medium-to-long term, according to US Bank’s review of market data going back to 1948.

Data suggest that impacts, when they are felt, hinge on far more than who is elected president. The composition of Congress matters, too. And perhaps counterintuitively, it’s divided-government scenarios that tend to affect market performance the most.

US Bank has identified three scenarios that have historically affected long-term average returns more than other outcomes.

On the positive side, these are: Democratic control of the White House with full Republican control of Congress, and Democratic control of the White House and split party control of the House and Senate.

On the negative side? Republican control of the White House with Democratic control of Congress tends to cause markets to drop slightly over time.

When it comes to other looming events that will determine market performance, shifting Federal Reserve policy and the increasing likelihood of interest rate cuts should top any list of discussion points and concerns.

Find the right channel

Even if the election is less of a watershed event than many individual investors believe, communicating is important to keep this critical audience invested.

One you know you have to communicate; the question then becomes how and where should we communicate?

If you’re concerned about a jittery retail audience, social media may be the least expensive and most effective place to turn. In the recent Betterment survey, 28% of retail investors ranked social media among their top three trusted investment sources.

Not surprisingly, the younger the investor, the more social media matters. 61% of Gen Z investors, or those age 27 or less, take investment advice from social media. And the top social-media channel for financial advice for this retail demographic is YouTube, followed by Instagram and Facebook.

If you’re looking for help communicating with your investors in the midst of this electoral cycle, get in touch.

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