As the 2024 presidential election approaches, many of us grapple with heightened anxiety about the potential impact on our financial futures. It’s a natural reaction to feel jittery when the political landscape seems to be in flux, but it’s essential to maintain perspective and adhere to a solid financial strategy.
Consider these tips for managing your financial planning with confidence during election years.
Understanding the Impact of Elections on Your Finances
Election years often come with increased market volatility, driven by speculation about potential changes in economic policy. While the Democratic platform advocates for expanding U.S. manufacturing, investing in clean energy, and controlling healthcare costs, the Republican platform seeks to support traditional energy sources, reducing financial regulations and easing real estate development restrictions.
Despite these stark differences, it’s crucial to remember that any proposed policies require Congressional approval and might face legal challenges before they take effect.
Historically, the impact of a presidential election on the broader market has been less dramatic than one might expect.¹ The key to navigating these times lies in maintaining a long-term perspective and not allowing short-term political developments to dictate your financial decisions.
Stay Focused on Your Long-term Goals
As financial planners and investment advisors, we consistently advise against making significant changes to your investment strategy based on election-year volatility. The underlying principle is simple: short-term market fluctuations should not derail your long-term financial plans. A well-diversified portfolio tailored to your risk tolerance and financial goals should be robust enough to weather temporary market dips.
Historical performance shows that markets often rebound positively following elections and have typically posted solid returns during presidential election years.² This trend underscores the importance of staying true to well-established financial plans.
Reactionary Decisions and Maintaining Control
One of the most significant risks during election years is making reactionary decisions based on current events or political anxiety. Instead, focus on aspects of your financial plan that you can control.
Consider evaluating your savings rate, ensuring an adequate emergency fund, and reviewing your insurance policies. Unlike the broader political landscape, these areas directly impact your financial stability and are within your control.
Diversification and Risk Management
Maintaining a diversified investment portfolio is a fundamental strategy for managing risk. Diversification helps spread risk across different asset classes and sectors, reducing the potential impact of any single political or economic event.
While short-term market volatility is often a byproduct of political uncertainty, it’s important not to let temporary fluctuations dictate your financial decisions. Maintaining portfolio balance and staying the course with long-term planning goals will help ensure you’re well-positioned to handle market volatility.
Embrace a Balanced Perspective
Concentrate on long-term financial planning principles, such as diversification, risk management, and maintaining a steady investment approach to avoid making financial mistakes due to election-year anxiety.
Markets are inherently volatile, and political events are just one factor influencing financial performance. By focusing on what you can control, you can confidently navigate the uncertainties of an election year. Remember, the most effective financial plans are grounded in long-term goals and disciplined strategies, not reactionary responses to current events.
As always, if you have questions or need personalized advice, don’t hesitate to contact your financial advisor. We’re here to support you through every twist and turn on your financial journey.
Sources:
¹Bloomberg Finance L.P. Analysis: S&P 500 performance in presidential election years 1984 to 2020. https://static.chasecdn.com/content/dam/articles/secondary-images/tmt-july-twenty-four-twenty-four-daily-chart1.jpg
²Morningstar Analysis as of 12/31/2023. https://www.blackrock.com/blk-inst-c-assets/cache-1712340930000/images/media-bin/web/institutional/insights/stocks-continued-higher-holding-presidency.svg
About the Author – Garrett C. Spangler, J.D., LLM
Garrett Spangler is Senior Wealth Strategist at Bryn Mawr Capital Management. In his role, Garrett works with clients on a variety of planning areas such as trust and estate planning, wealth preservation, and income tax and liability exposure. Prior to joining Bryn Mawr Capital Management, Garrett was an associate at The Erb Law Firm, PC practicing tax, estate, and business succession planning, with a focus on non-citizens and international planning for those with foreign assets. Garrett earned his law degree (J.D.) and master’s in taxation (LL.M.) from Temple University’s Beasley School of Law and his bachelor’s degree from Penn State University’s Smeal College of Business.
This communication is provided by Bryn Mawr Capital Management (“BMCM” or “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this commentary is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in this report is derived from sources that BMCM believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.
Bryn Mawr Capital Management, LLC. is an SEC registered investment adviser and a subsidiary of WSFS Financial Corporation. Registration as an investment adviser does not imply a certain level of skill or training.
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