Several reasons for investors to remain bullish

With the U.S. presidential election less than two weeks away and voters decidedly split, some investors are understandably spooked.

“This is likely to cause a little bit of choppiness in the markets,” Jordan Jackson, a global market strategist at J.P. Morgan Asset Management, said at CNBC’s Your Money event on Thursday.

On Wednesday, the Dow suffered its biggest one-day loss since early December, declining more than 400 points. The S&P 500 shed nearly 1%, and the Nasdaq lost 1.6%. As of mid-afternoon Thursday, the Dow was headed for its fourth straight decline, while the S&P and Nasdaq were up slightly.

If history is a guide, “when you look back over previous election cycles, while you do have that choppiness leading up to the election, almost uniformly you get markets that bounce back at the tail end of the year,” Jackson said.

As Election Day nears, 72% of American investors say they are worried about the presidential election, according to a survey from life insurance company F&G. 

But the best course of action is to “stay the course,” Jackson advised.

“Markets are resilient,” he said.

Despite November’s choppiness, when you look at the broader picture, “there are a number of reasons to be bullish,” Jackson said.

For starters, according to Jackson, more interest rate cuts are expected to follow the Fed’s half-percentage-point reduction in September, if inflation indicators cooperate. The annual rate of CPI inflation was 2.4% in September, a vast improvement over the 9.1% top in June 2022.

“That tends to be a very good backdrop,” Jackson said.

In addition, “things are looking pretty good from a corporate fundamentals perspective,” he said, although “we have to be careful making big sector bets based off of the rhetoric we hear on the campaign trail.”

“But again, I do think that when we look at the broader backdrop, follow the earnings, there’s more all-time highs in the market as we round out this year and more all-time highs over the course of next year,” Jackson said.

For consumers, it will take longer to adjust to price pressures, even though wages are rising and unemployment is low.

“I think over the course of next year, we should continue to see consumers start to feel a little bit more confident about their wallet share and what they are able to spend,” Jackson said.