As the U.S. presidential election draws near, expect to see more and more headlines that propose, “What will happen next if this person is elected?” or, “What policy changes to prepare for in the next four years?”
In reality, however, it isn’t easy to anticipate what may happen with the financial markets after the November elections. An ambitious investor would have to forecast the election results, evaluate which policies may become law, estimate a potential economic impact, and assess how the financial markets might react. That’s a tall order.
Remember, in addition to the presidency, a total of 35 Senate seats and 435 Congressional seats will be on the ballot. The makeup of the country’s executive and legislative branches may look much different—or very similar—in 2021.
A financial professional’s role is to help guide and equip clients with the tools they need regardless of who controls the White House or Congress. We’ve been through several elections, and we’re not going to be influenced by a headline that speculates about a policy or projects a new approach.
It should come as no surprise to hear the economy is the top issue for voters in the 2020 election. It seems the majority of voters say that the economy will be very important to them when they cast their votes.
But when voters say “economy,” what do they really mean? Is it a catch-all phrase for personal finances? Not exactly. Here’s a breakdown of voters’ top three economic concerns and what each candidate has said about the issues.
Questions about trade. Questions remain about what will develop between the U.S. and China following the election. President Trump has worked to revise the U.S.-China trade agreements, while former Vice President Joe Biden has indicated he may move towards a more open trade policy.
Corporate taxes. President Trump passed The Tax Cuts and Jobs Act (TCJA) of 2017, a far-reaching piece of legislation that included lowered corporate taxes. Former Vice President Biden has said that he wants to repeal parts of the TCJA and has indicated he would be in favor of raising corporate taxes back up to 28% from 21%.
Climate change. Former Vice President Biden has put forward his “Clean Energy Revolution,” which is designed to transition the country to 100% clean energy and net-zero emissions. President Trump is likely to continue to pursue adjusting environmental regulations and supporting fossil fuel.
Here is a startling statistic. Some polls suggest that as many as 45% of consumers with $100,000 or more investable assets expect to make changes to their investments due to the upcoming 2020 presidential election.
Second-guessing your investment strategy is natural, especially with an election on the horizon. Emotions are running high as many are divided about what may happen to the financial markets with the election just weeks away.
It’s a good time to remind everyone that investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. If you’re concerned that the upcoming election may change one of these key factors, perhaps it’s time to review your portfolio.
Making a change to your portfolio should be driven by sound analysis, not an emotional response to a current event.
- Kevin Theissen, HWC Financial
