UK’s PensionBee has shared insights on whether the result of 2024’s US election will impact users’ pension balance.
It was announced that Donald Trump would be returning to the White House for a second term in office.
PensionBee noted that the former President won the 2024 US election with 277 electoral votes against the current Vice President Kamala Harris.
PensionBee added that the outcome of this election will “shape international trade and the global economy for several years to come.”
The online pension provider has looked at if this will matter for your pension savings.
As explained in the update from PensionBee, most pensions are diversified across a “range of locations and asset types,” including in the US.
PensionBee further noted that this means your retirement savings could be invested in “company shares, bonds, cash, property and other assets in the region, depending on the plan you’ve chosen.”
PensionBee also mentioned that many UK pensions invest “heavily in US companies because they’re some of the biggest – and in recent years most profitable – companies in the world.”
These include the big players in the technology sector, known as the ‘Magnificent Seven‘.
As stated in the update from PensionBee, the ‘Magnificent Seven’ comprises Apple, Microsoft, Amazon, Alphabet (Google’s parent company), Nvidia, Meta (Facebook’s parent company), and Tesla. These companies make up “the top 10 holdings in most of our PensionBee plans.”
As noted in a blog post by Pensionbee, uou can measure how much a company is worth by ‘market capitalisation’, which is based on the “current share price and the number of outstanding shares. Together, the ‘Magnificent Seven’ make up more than 29% of the S&P 500’s total valuation.”
As you can see, these companies have a “combined value of over $13 trillion.”
In comparison, PensionBee pointed out that the biggest FTSE 100 company is oil and gas giant; Shell, which has a market cap of just “over £180 billion.”
Even combining the values of the seven largest FTSE 100 companies, those companies “only reach £738 billion.”
The US stock market holds a “significant presence in global indices,” which track the total value of many publicly listed companies around the world.
PensionBee explained further that this is because a “big portion of the world’s most valuable companies have headquarters in the US and are listed on US stock markets.”
Ultimately, the aim of pension investing is to generate “positive returns over the long term so that pension savers can enjoy a happy retirement. It’s important to remember that with pension saving, you may have decades ahead of you to ride out multiple cycles of market volatility and benefit from compound interest.”
During the last 10 years the FTSE 100 has “grown 17%, compared to the S&P 500’s impressive 154% return.”
Investing in US companies allows UK pension funds, such as those which PensionBee plans are invested in, to “benefit from this growth and potentially achieve higher returns for pension savers.”
Since 1928, the S&P 500 has generated a “positive return in around 75% of US election years.”
This means that US elections don’t necessarily translate to “negative stock market performance of US companies. In most cases the opposite is true.”
As noted in a blog post by PensionBee, the S&P 500 has “experienced positive returns in the majority of election years since 1928.
The six election years where the S&P 500 did have a negative return were:
- Franklin D. Roosevelt’s first election in 1932, during the Great Depression;
- Roosevelt’s third election in 1940, at the start of World War II;
- Harry S. Truman’s first election in 1944, at the end of World War II;
- John F. Kennedy’s first election in 1960, during a short-lived US recession;
- George W. Bush’s first election in 2000, during the early 2000s recession; and
- Barack Obama’s first election in 2008, during the Global Economic Crisis.
In most of these election years, the incoming US President was “facing a climate of global financial difficulties.”
Overall, based on historical experiences, US election years can be “positive for stock market performance and ultimately for your pension pot. Just bear in mind that past performance isn’t a guarantee of future returns and the value of your pension could go down as well as up.”
Although the result of the US election might be making the headlines, pension savers shouldn’t “lose sight of the bigger picture.”
PensionBee also mentioned that your pension is a “long-term” investment and usually continues to “grow through elections.”
The long term nature of your pension gives you “plenty of time to top it up, track its progress and plan for your retirement.”
PensionBee concluded that making regular contributions to your pension is a good way to benefit from any “potential market volatility” around elections, as you’ll buy company shares at their “lowest and highest prices” over time without needing to worry too much about “timing” your investments.