With less than a week to go before the election, many 401k plan sponsors may wonder how the outcome may affect their plan. I have seen all kinds of opinions on this, such as the “Presidential Election Cycle Theory” which holds that, regardless of who wins, the equity markets are weakest in the year following election year. There are some studies that “prove” that the markets do better under democrats than republicans. Etc
Some of these studies do have some merit, in proving some kind of election/market correlation. But correlation does not imply causation (Both forest fires and ice cream sales are up in the summer but forest fires don’t cause more ice cream sales). Also, if there is some causation it can change at any time as the markets and the world changes (During Obama’s second term, the market completely failed to follow the “Presidential Election Cycles Theory”)
It’s too complex, risky and expensive to try to adjust 401k investments based on an election. Instead ignore the election when setting up and adjusting your long-term plan for your 401k.