While the upcoming presidential election may cause apprehension among some people, asset managers at Columbia Threadneedle warned investors against making any drastic moves in the months leading up to or after it.

Like most election years, 2024 has investors worried about how the economy will fare amid any possible surprises in November. Some investors are likely wondering whether they should sell off their equities and other risky investments in anticipation.

But they should actually stay put, according to Josh Kutin, Columbia Threadneedle’s head of asset allocation for North America. Kutin spoke during a webinar Wednesday highlighting the firm’s midyear outlook.

According to Kutin, since 1948, stocks have 63% of the time posted higher returns after an election through the end of the calendar year.

“Generally, investors have been rewarded for holding their risky assets through that period,” he said.

After stress-testing the markets and anticipating outcomes, the firm doesn’t see a win by either current President Joe Biden or former President Donald Trump having a negative effect on the economy.

“There is no outcome here that we think is going to be negative for markets directionally as we think of the various candidates and even the potential replacement candidates who might be in the mix as well,” Kutin said.

There’s been a 17% year-to-date increase in the domestic equity markets, though the numbers have been driven by some of the larger companies, according to William Davies, global chief investment officer at Columbia Threadneedle.

Growth has been up all around the world, but it has been much stronger in the U.S. than in other countries, Davies said.

Inflation continues to be a concern, though not as much as it was two years ago, the two executives said. The headline Consumer Price Index has been steadily falling around the world since 2022, though it remains about 3% in the United States, Davies noted.

“That does mask core inflation being a bit higher than headline inflation, so there’s still more work to do there,” he said during the webinar. “But nonetheless it's an environment where we’re starting to see interest rates come down.”

The firm is anticipating that inflation will remain above 3% until the first quarter of next year, Kutin said. However, while those projections are higher than what others are predicting, the firm is not anticipating a return to the record-setting inflation of two years ago.

Inflation is, however, influencing the way the firm constructs its portfolios. In the short term, Columbia Threadneedle is looking to be underweight in both fixed income and cash, Kutin said.

“If we think about the months that are coming ahead, some of this uncertainty, the exact timing of when rate cuts will occur, the exact timing of when we and various decision-makers feel inflation is [more] under control than it is right now, then we do believe that equities will continue to be rewarded,” he said.

Over the next five years, the firm sees fixed income performing well, with cash coming in at around 4.4%, U.S. Treasurys at 4.7%, and municipal bonds at 5.2%. The firm’s equity outlook is also positive; the firm projects 6.3% returns for large-cap stocks, 9.6% returns for small caps, 6.7% returns for developed market stocks and 8.4% for emerging markets.

Equities typically enjoy returns in the double digits more than 10 years out, Kutin said.

He noted that the 6.3% projected large-cap return is less than the 7.5% return the firm is projecting for high-yield corporate bonds.

“This is a very provocative comparison, because even if high-yield bonds are riskier than the rest of the fixed-income complex—and they do present some unique counterparty risks to them overall if we’re thinking of things like volatility—we do believe that those equities are going to be more volatile than those high-yield bonds,” he said.