If there’s one constant in investing, it’s this: markets don’t like uncertainty. And the political noise around the upcoming U.S. Presidential election can make matters seem more volatile and uncertain than they really are. Each side predicts doom and gloom if the other is elected. How will the U.S. Presidential election impact your financial plan?
As an investor, you may be wondering—and perhaps even worrying about—how the election results will affect your investment portfolio. That’s not uncommon. The candidates have significant policy differences, the Dow Jones Industrial Average has risen an average 10.1% during election years with an incumbent president running for re-election, regardless of party.* And, even without that data point, we don’t believe the result of the election should materially affect your long-term approach to investing.
U.S. Presidential election and Economic Platforms
This is not to say that markets over the next four years would look identical under either president. The Republican and Democratic parties typically have different approaches to taxation, trade, and regulation. While there is some concern that, if the Democrats control the presidency and both houses of Congress, corporations may be face higher taxes, which could affect profits. However, the tax increase that has been discussed on the campaign trail should only have a modest impact on valuations. Trade policies under each candidate vary and may affect the prospects for growth in certain areas of the world. However, neither should drastically hurt growth over the long term. And some industries, such health care and energy, might see different sets of rules and regulations depending on which candidate wins.
However, regardless of most policy decisions, markets are resilient. They are made up of individual businesses and managed by people. In general, people respond to events and political developments and adapt in whichever way is most beneficial to themselves or their business and shareholders. That will continue to be the case regardless of who wins the White House race.
Presidential Party, Market Response and Your Financial Plan
While people may feel strongly about the issues supported by each candidate, or even about the candidates themselves, it is important to not let that cloud your judgement when it comes to your long-term financial health. Historically, the party of the president has not actually led to any clear pattern for stock market returns. The chart below, which shows the growth of a dollar invested in the S&P 500 since 1926, helps to illustrate that point.
Value of a Diversified Portfolio
Here’s the bottom line: any candidate’s policy differences should not be large enough to significantly impact the way you are invested. If your portfolio is diversified, aligned with your long-term goals, and appropriate for you today, it will still be appropriate for you once the presidential election is settled. We may see additional volatility in the time around the election, as we did in 2016, but a diversified portfolio is typically built to account for that volatility.
Whenever there something as important as a presidential election it’s hard not to worry about the impact. However, once the election results are known, businesses will continue to adapt and do what’s best for their shareholders. As always, the RegentAtlantic team will keep abreast of market factors and adapt as needed to market conditions. For now, making long-term portfolio changes based on a singular election isn’t the best course of action.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.