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We are about 2 months away from the election. History says that might not be the best news for investors.

This period usually comes with declines in the major stock market indices.

US presidential election season is in full swing, and we’re less than two months away from casting our ballots for many of our next political leaders.

Along with the political ads that seemingly take over every commercial break, election season has often had investment implications. Unfortunately, it has not always been in favor of investors. Lately, the two months leading up to the presidential election came with negative stock market performance.

Here’s how the three major stock market indices — S&P 500, Nasdaq Compositeand Dow Jones — have evolved in the two months leading up to each presidential election since 2000.

Year S&P 500 Returns Nasdaq Composite Return The Dow Jones is back
2000 (4.7%) (16.7%) (2.7%)
2004 1.1% 5.9% (2.5%)
2008 (18.7%) (21.2%) (14%)
2012 (0.3%) (4%) (0.3%)
2016 (1.9%) (1.3%) (0.8%)
2020 (2.5%) (2.6%) (2.9%)

Data source: Dow Jones.

Use historical events as a reference, not an end-all-be-all

Since 2004, none of the three major indexes have closed the two-month period leading up to a presidential election with positive results. The S&P 500 and Nasdaq Composite finished positive in 2004, but that’s the only time that’s happened since the turn of the millennium.

This is not to say that the election is the only cause (it is not), but the uncertainty that often comes with election season plays a role in market volatility during this time. It also doesn’t mean it’s guaranteed to happen this year. Past performances and appearances do not guarantee future performances or appearances.

Therefore, it is important to note that market timing is not a sound strategy for long-term investors.

Hands holding up fans of cash in front of an American flag.

Image source: Getty Images.

Still. patterns like these are worth knowing and paying attention to, but they are not definitive predictions of what will happen. No one can predict how the stock market will perform in the short term, including me, you, Wall Street executives or even the most experienced investors.

Now might be a good time to focus on dividend income

As we approach a volatile period in history, leaning on a dividend-focused exchange-traded fund (ETF) might be a good idea. On the one hand, the focus on dividends provides investors with a guaranteed income. On the other hand, going the ETF route versus individual stocks can help provide some stability because the risk is spread across many companies.

A good option to consider is Schwab US Dividend Equity ETF (SHD -0.61%)which contains over 100 high dividend yielding stocks with an above average dividend history and solid financials. The inclusion criteria help prevent companies from being added to the ETF simply because they have a high yield. It’s natural quality control, for the most part.

This ETF’s dividend yield is about 3.4%, well over double the average yield of the S&P 500. It may not be the ultra-high yield you can get from some of the individual stocks it holds — how would be Altria Groupwith a yield of over 7.5% — but that’s a solid amount for a broad ETF.

The ETF’s quarterly dividend payout fluctuates because its companies’ payouts vary. However, you can trust that it will grow over the years. In the past 10 years alone, the dividend has tripled to about $0.82.

SCHD Dividend Chart

SCHD Dividend Data by YCharts.

You can adjust, but you don’t change completely

You shouldn’t look at historical stock market movements and use them to completely change your investment strategy. You can adjust it to account for long-term trends or changes in your risk tolerance, but full swing teeters on the line of trying to time the market, which you always want to avoid.

What’s more effective than adjusting your stock portfolio to account for every historical pattern is staying consistent through ups and downs. This is the only thing any investor can control.

Using a strategy like dollar cost averaging is helpful because you establish a set investment schedule and stick to it regardless of market movements. Sometimes you will buy when stocks are rising and sometimes you will buy when they are falling. The key is to trust that it will even out over time, and this should save you a lot of extra work down the road.

Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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