Speed read
On 4 November, the morning after Democrats won both houses of the US Congress, financial markets initially reacted sharply before reversing course by the end of the day. The speed and unpredictability of that reaction illustrate how difficult it is for investors to turn political events into reliable portfolio decisions.
After the 2016 US election, a study of millions of household portfolios found that likely Republicans moved into shares and likely Democrats moved into safer assets, on the same news. The shifts built up over months and came mostly from a small group making large changes. Elections change investors more than they change markets. A portfolio governed by an investment committee, with a long-term allocation and defined trading rules, can prevent the electoral cycle from becoming an unplanned change to a client’s investment strategy.
Key takeaways
Markets reprice quickly
When the results came through overnight on 3 November, US equity futures initially fell as investors considered the implications of a Democratic-controlled Congress. By the end of the following trading session, major markets had moved in the opposite direction.
The specific market reaction is less important than how quickly it changed. Political events can produce an immediate repricing, but the reasons attached to that move are often uncertain and can change just as quickly.
This pattern is not new. After the 2016 election, US equity futures fell sharply overnight as Donald Trump’s lead became clear, before the major indices closed higher the following day. The episode illustrates why trying to turn an election result into a precise portfolio decision is difficult: markets can move before investors have formed a considered view, and can reverse before that view has been acted upon.
Chart 1.Overnight low in futures against the next-day close, 8 to 9 November 2016, %, US dollars.
Source: BBC News, 9 Nov 2016; Forbes, 9 Nov 2016. Futures lows approximate. Price change, %, USD. Past performance is not a reliable indicator of future performance.
Same news, opposite trades
What investors did next tells you more. Maarten Meeuwis, Jonathan Parker, Antoinette Schoar and Duncan Simester studied account data for millions of US households saving for retirement, in research published in the Journal of Finance in 2022.
After the 2016 election, households in the most Republican areas moved money into shares and made their portfolios more sensitive to the market. Households in the most Democratic areas moved towards safer assets. The researchers compared people who worked for the same employer and lived in the same county, while controlling for differences in employment, income and local economic conditions. These factors therefore do not appear to explain the partisan gap.
Both groups saw the same result on the same night. The evidence suggests that both groups interpreted that same information through different views of the world.
The partisan response was not fixed. After Barack Obama’s re-election in 2012, the researchers found evidence of the opposite pattern, with Democratic-leaning investors increasing their equity exposure relative to Republican-leaning investors. Supporters of the winning side grow more hopeful about the economy, and supporters of the losing side less so.
A study by Richard Curtin of the University of Michigan’s Surveys of Consumers helps explain the mechanism. Among the same respondents surveyed before and after the 2016 election, Democrats became substantially more pessimistic about the US economy, while Republicans became more optimistic. Expectations for personal income moved far less than expectations for the broader economy, suggesting that political identity influenced how people interpreted the same economic information.
Professional expertise does not remove the bias
Training doesn't remove the effect. Elisabeth Kempf and Margarita Tsoutsoura studied credit analysts at major credit-rating agencies, whose careers depend on accuracy. Analysts whose preferred party had lost the presidential election issued more negative company ratings than colleagues assessing the same company during the same period. In a survey, the partisan gap in their economic outlook was about three quarters of the gap among ordinary US households.
If even professional analysts can interpret the same economic information through a political lens, the solution is unlikely to be better political forecasting. It is a disciplined process for making investment decisions.
Portfolio changes can persist for months
In 2016, the shift in household portfolios built up over six to nine months after the vote. Markets had moved in a day.
The average change was small, about half a percentage point of portfolio value between the most Republican and the most Democratic areas. Most households did nothing. In a given year only about a third changed their portfolio at all, and about a tenth moved money between shares, bonds and cash.
A minority acting at scale drove the result. Three quarters of it came from investors who changed the share of their portfolio held in equities by more than 25 percentage points. Households that had traded actively in the year before the election moved about three times as much as everyone else. The pattern is behavioural rather than necessarily irrational: investors who were more engaged with their portfolios were also more likely to turn their political interpretation of the election into an investment decision.
Chart 2. Estimated one-year change in the share of portfolios held in equities after the 2016 election, fully Republican against fully Democratic donor areas, percentage points, US data.
Source: Meeuwis, Parker, Schoar and Simester, Belief Disagreement and Portfolio Choice, NBER WP 25108 (2021), Table 3 col 1 and Table 4 col 1; published Journal of Finance 77(6), 2022. Price-constant equity share, US households.
Trading rose as well, from about 2.25% of assets a month before the election to more than 3% by March 2017.
A separate study of US state elections shows the round trip. In the months before a governor's election, stock market participation in that state fell by 2.7%, meaning that fewer households held any shares. The proportion of total household savings allocated to shares also fell by 3.8%. Once the election result was known, both measures moved back towards their previous levels, according to Agarwal, Aslan, Huang and Ren in the Journal of Financial and Quantitative Analysis in 2022. Where the governing party changed, the return was only partial. Each leg of a round trip like that carries costs, and the investor ends up roughly where they started.
The lesson is not that one political side was right and the other was wrong. It is that the same information produced opposing trades because investors interpreted it through their existing beliefs.
Portfolios are splitting along party lines
The pull is growing. Yihui Pan, Elena Pikulina, Stephan Siegel and Tracy Yue Wang studied the share portfolios of wealthy US households run by local advisers from 2001 to 2019. Stocks whose ownership differed systematically between Democratic and Republican areas made up 10% of market value in the early 2000s and 29% by 2017 to 2019. By 2019, approximately 20% of the holdings in the average Democratic-leaning portfolio differed from those in the average Republican-leaning portfolio.
Source: Pan, Pikulina, Siegel and Wang, Political Divide and Partisan Portfolio Disagreement, SSRN 4381330, Sept 2026 version, Table 5 Panel B. US advised household portfolios, USD basis.
The advisers' own politics didn't explain this. Their clients' politics did. Advisers increasingly accepted client instructions to exclude particular companies, and political preferences came in with those instructions.
This provides important context for the finding on delegated investment decisions. Meeuwis and colleagues found that investors who handed decisions to someone else, through mutual funds or adviser-managed accounts, moved less after 2016. The evidence on delegation should nevertheless be treated cautiously. Accounts in which investment decisions were delegated represented only 1.5% of the sample, so that estimate is less precise than the broader findings. The implication is not that delegation automatically produces better outcomes. It is that delegation can help when it operates within clear rules and a defined investment process.
What advisers can take from this
Voting matters, but it belongs at the ballot box. The evidence shows how easily it reaches a portfolio, for voters of every party. The point is not to separate politics from people’s lives. It is to separate political participation from portfolio decision-making. Advisers can help clients recognise that a strongly held political view does not automatically constitute an asset allocation signal.
We build portfolios around a long-term strategic allocation overseen by an investment committee that meets every month. We change that allocation only in modest steps, and only when markets sit far from their long-run equilibrium, which an election result rarely produces on its own. Portfolios are rebalanced when they move outside defined limits around their intended risk profile. This keeps portfolio changes connected to the agreed investment framework rather than to short-term political developments.
A portfolio that stays put through an election can look passive. In many cases, it is doing its job: maintaining the risk exposure required by the client’s plan as the market environment changes.
Advisers can bring the conversation back to the client’s goals, time horizon and risk capacity. Those fundamentals did not change because of the election result. If a client feels unsettled, the appropriate response is a structured review of their plan, not an impulsive change to their portfolio.
Important information
This document is only for professional financial advisers.The information given here is for information purposes only and is not intended to constitute financial, legal, tax, investment or other professional advice. It should not be relied upon as such and PortfolioMetrix cannot accept any liability for loss for doing so. If you are a retail investor, your financial adviser can help explain the information provided. Any forecasts, expected future returns or expected future volatilities are not guaranteed and should not be relied upon. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Past performance is not a reliable indicator of future performance. Portfolio holdings and asset allocation can change at any time without notice.
PortfolioMetrix Asset Management SA (Pty) Ltd is an authorised Financial Services Provider in South Africa, regulated under the Financial Advisory and Intermediary Services Act 37 of 2002 (FSP No: 42383). It is a limited liability company registered in South Africa under company number 2006/026054/07
All market moves, prices and returns in this document are in US dollars. The election, portfolio and survey evidence is US-sourced and describes US investors and US markets; it is single-market evidence and is not specific to UK or South African investors, although the behaviour it describes is not limited to any one country. For an investor whose own currency is sterling or rand, exchange rate movements would add to or subtract from the dollar moves shown unless the holding is currency-hedged. Market moves on 3 to 5 November 2026 are intraday or same-day reports and may differ from final settlement data. Historical relationships between elections, investor behaviour and markets are not a forecast. All data and statistics sourced as cited: The Guardian, The New York Times, Reuters, Associated Press, BBC News, Forbes, Meeuwis, Parker, Schoar and Simester (Journal of Finance, 2022), Kempf and Tsoutsoura (Annual Review of Financial Economics, 2024), Agarwal, Aslan, Huang and Ren (Journal of Financial and Quantitative Analysis, 2022) and Pan, Pikulina, Siegel and Wang (SSRN, 2026). Richard Curtin, “Consumer Economic Expectations: Persistent Partisan Differences”, University of Michigan, 2018. PortfolioMetrix, November 2026.