We’re at the point in the election cycle where finance and politics intersect. It’s almost uncanny that, in the course of just a week, I received the same questions over and over. And they came from clients and readers alike. My instincts tell me that it’s generally prudent to avoid political discussions, but I don’t want to ignore the fact that elections often bring out fear of the unknown.
The gist of the queries I’ve been receiving goes something like this: “My investments did well in 2019, and after the initial sell-off at the beginning of the pandemic, my account values have rebounded strongly. Now I fear there will be a market sell-off after the upcoming election. What, if anything, should I do?”
Again, I can’t emphasize enough how many times I’ve recently been asked for this post-election investment advice. And my initial answer is that I don’t have a crystal ball.
All anyone can do is look to history for guidance while keeping in mind that while history often repeats itself, there is no assurance it will do so again.
What initially pops into mind is our most recent presidential election. I had a client who was very upset about this past election and convinced that the result would crash the market and collapse her portfolio. So she decided to move everything into cash.
As you know, the investment world didn’t collapse. Quite the contrary, it surged to new height while she remained on the sidelines. This highlights two important points. One, if you drop out of the market, how will you know the opportune time to reenter? And two, it’s extremely important to put your emotions aside when it comes to investing.
Let’s say for example purposes only, you’ve done your planning and strategizing and you feel comfortable putting 50 percent of your portfolio into domestic U.S. equities. I see no compelling reason why the upcoming election should cause you to make any changes at this point.
That’s not to say the next elected president won’t have any influence on the financial trajectory of our nation. He will, as will both houses of Congress. And then there’s the American consumer whose saving and spending patterns have a very significant impact our nation’s finances.
People tend to have strong political opinions and these opinions often pour over to the world of investments.
That being said, financial portfolios can be adjusted based on who occupies the oval office. Revisiting your hypothetical 50 percent in U.S. equities, if you have a fund manager, he or she can make adjustments. Perhaps by trimming some holdings in energy stocks and reallocating them into healthcare stocks. In other words, tweaking and modifying your portfolio is significantly different than simply abandoning a strategy.
For most investors, I suggest you keep your political emotions in check, stick to your long-term financial plan and stay diversified. I’m confident that, the day after the election, you’ll still need to earn a paycheck and pay monthly bills and that your family will still need to be raised and educated.
There’s nothing normal about this COVID-19 world, but no matter who resides at 1600 Pennsylvania Avenue, you need to stay on target with your personal goals and objectives. If you’re on the sidelines, your chances for success may be greatly diminished.