HomeStockElection Aftermath Ignites Market Boom: Should You Dive In Headfirst?

Election Aftermath Ignites Market Boom: Should You Dive In Headfirst?

The unprecedented global panorama of 2020, defined by a health pandemic and a consequential economic downturn, has paved the way for one of the most dynamic and volatile years in recent market history. Interestingly, a major turning point occurred after the U.S elections in November, evidenced by the significant bull runs observed across global stock markets.

Firstly, an enhanced understanding of the post-election market surge is paramount. A variety of causes has been identified as spurring this burgeoning growth, beginning with increased market clarity and decreased volatility associated with U.S. elections. Contrary to popular belief that markets suffer due to political transitions, history emphasizes that markets often favour certainty over uncertainty, despite the party or individual that assumes leadership. The resolution of the highly tumultuous United States election process provided a clear directional view, which has historically tended to be a major catalyst for bullish market trends.

Alongside this, the optimism about COVID-19 vaccinations was another momentum driver for the market surge. The prompt and successful development of vaccines by pharmaceutical giants Pfizer and Moderna alleviated anxiously held reservations about a prolonged pandemic. Positive news about efficacy over 90% for both vaccines spurred a worldwide rally of stock prices, spearheaded by a revival in stocks that took the most significant hit since the pandemic onset, especially those in travel, hospitality and physical retail sectors.

The key question then looms – is it time to go all-in? Before making any investment decision, it is important to consider several considerations specific to one’s financial standing, risk appetite and overall investment objectives.

It is crucial to highlight that markets, by nature, are unpredictable. Just as an immediate post-election surge was not guaranteed, future performance and growth cannot be unconditionally forecasted either. Volatility becomes the name of the game, and ‘riding the bull’ can potentially rhyme with severe financial risk.

Therefore, rather than pouring all resources into the market, investors would do well to implement a systemic investing strategy. This involves a gradual introduction of funds into the market, also known as dollar-cost-averaging. Herein, irrespective of a bullish or bearish trend, increments of cash will continually be introduced to the market at regular intervals for a pre-defined period. Such an approach not only hedges against market volatility but also allows for booking profits at different levels and reduces the pressure to time the market accurately.

On the sectoral front, it would be advisable to put funds into a diversified investment portfolio rather than singularly concentrating on sectors that have outperformed like technology or pharma. Emerging markets and small-cap stocks that show signs of strong economic recovery hang new growth potential, also worthy of consideration.

Lastly, it is of high importance to remember that investment is a marathon, not a sprint. Though the post-election surge may inspire quick gains, successful market participants understand that reliable wealth creation requires discipline, patience and thoughtful timing. It is not necessarily about immediate large profits but rather about the progressive accumulation of return on investments.

In conclusion, the post-election market surge offers promising opportunities for investors willing to be strategic, broad-based and patient. To go all-in or not is not just about market conditions, but also about individual financial circumstances, investment planning and risk evaluation.

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