Now that the candidates are close to set, election season is in full swing. Even more than usual, we’re fielding a lot of calls from clients concerned about what the impact will be on their finances.
It’s a fair question. After all, elected officials have the potential to impact your savings, taxes and investments through policy. There is a sharp divide in terms of how to handle coronavirus reopening that seems to fall on partisan lines. Here’s some advice to keep a level head as we enter the 2020 vortex.
Don’t sweat the results
Easier said than done, we know. The fact is, most people are pretty passionate about their candidate, and part of that is because they believe their candidate will bring about better economic outcomes.
However, it’s important to remember that, after every election, about half of the country is happy with the results, and half is unhappy. Historically, when a Republican is elected president, markets generally do well during the year of the election. When a Democrat is elected, the markets tend to perform better in the year of the inauguration. Moreover, historical data suggests that markets rise over time regardless of who sits in the Oval Office. .
Both parties want the economy back in action
You’re going to read a lot of articles about how this or that candidate will bring about financial ruin. Forget the conspiracy theories. It is in everyone’s interests, Democrat, Republican and everyone in between, to get the economy moving as quickly and safely as possible.
You’ll hear a lot about how the markets are doomed from folks who want to win your vote. Some may have predicted the stock market crash of 2007. What they won’t tell you is that they predicted the recession of 2014, and 2016. What, you never heard of those? That’s because they never happened.
A stopped watch is right twice a day. If people really knew when the stock market was going to crash, they could make a fortune. There are people who want to generate press by scaring investors. Vote your conscience, but ignore the doomsday prognosticators.
Look past temporary volatility
Easier said than done right now, but you have to keep your eye on your long-term goals. If you invested at the height of the previous bull market back in 2007, you likely saw a major loss in the ensuing years. And, if you sold off and backed away from the markets, you likely realized those losses in their entirety. If you held on and rode out the storm, you are likely now well ahead.
Markets don’t like volatility, and they certainly don’t like pandemics, but they do like time. Trying to invest in order to time bear and bull markets is a fool’s errand. In the immediate aftermath of the 2016 election, stocks briefly tumbled, only to quickly rally. Much of the losses we saw at the onset of the coronavirus have been recouped.
Strategize with goals in mind
Investing isn’t about making money now. It’s about having money when you need it. We can’t know what impact this or that election will have on investments. But we do know that taxes are inevitable, and it is important to be diversified in order to minimize the bite the IRS takes out of our retirement savings.
The best antidote to panicking over election outcomes is to have a long-term strategy. Aim for tax and asset diversification. Understand your risk levels in light of when and how you want to retire. That’s the key to investing in election season.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This article was originally published in the Pioneer Press. You may view the article here.
Series 7 & 63 Securities Registrations,1 Series 66 Advisory Registration, † Insurance License Bruce has been in the financial services industry since 1983 and is one of the founders of Wealth Enhancement Group. Since 1997, he has hosted the “Your Money” radio show, a weekly program that focuses on delivering financial advice in a straightforward, jargon-free manner. Bruce also hosts with the "Mid-Morning" crew on WCCO-TV each Tuesday morning to...Read More