Post Election Insights: How the Election Outcomes May Shape Your Financial Future
With election day over, many are reflecting on what this new leadership might mean for their financial future and the country. While elections can stir strong emotions, it's important to remember that, historically, markets have been influenced more by economic fundamentals than by which party is in power.
As this chart shows, while the stock market has fluctuated under presidents of both parties, the S&P 500 has trended higher over the long term, no matter who’s sitting in the Oval Office.1
● Over the past 70 years the stock market as represented by the S&P500 has advanced under every administration.
● The stock market, has generally trended higher over the long term, regardless of which party holds the presidency.
● The dynamic U.S. economy has consistently produced successful companies, contributing to economic strength under various administrations. As my mentor in the financial services taught me back in 1987, there has never been a stronger economic engine on earth than the American Economy. He warned me never to bet against American innovation, entrepreneurialism and drive to succeed.
● Factors like earnings growth, economic conditions, and technological advancements can have more influence on market performance than political changes.
● Your investment strategy should align with your goals, time horizon, and risk tolerance—not the outcome of a single election.
Elections do have influence on business sentiment, fiscal policy, taxes and consumer confidence. Each of these can have an impact on how the stock market performs but it’s important to keep perspective. Company earnings are what drives the stock market. Afterall, stock prices are simply the present value of the future stream of earnings that a company can produce. Companies will continue to strive to drive earnings higher and that is good for investors.
We will continue to closely monitor how the new administration's agenda might impact areas like tax policy, regulations, government spending and deficits as well as corporate competitiveness. Market reactions to political shifts can create short-term volatility, but these fluctuations are usually temporary.
As always, the key is to stay focused on your financial goals. Sudden moves in response to short-term events might be more detrimental than beneficial. We’re here to help you navigate any uncertainty while pursuing your overall financial strategy.
Over the course of the summer and as recently as last week we made modifications to our investment portfolios based on the great performance that we have had year to date. One of the basic rules of investing is to “buy low and sell high”. With the market continuing to march to new all-time highs, we will continue to rebalance through the end of the year. We will be harvesting gains, selling at market peaks in order to protect your investments from any sudden downturn in the future. Simultaneously we will look to harvest tax losses, although losses are few in a year like this.
We have reduced exposure to buffered ETF’s due to their “capping” which limits their ability to participate in upside market growth. We have added alternative assets and alternative trading strategies which provide low correlation to the stock market. This type of diversification has served us well over the past 37 years and we expect it to provided better diversification for us in the future. In addition, we have rebalanced our portfolios by reducing exposure to mega cap stocks and increasing exposure to mid-cap stocks which are “less expensive” based on price to earnings ratios. We expect good returns in 2024, so don’t be surprised if your taxes are a bit higher this year. While I personally prefer to pay as little tax as possible, I am always happy to pay taxes if it means that my portfolio went up significantly.
If you have questions about how current events could impact your investments or want to discuss your financial strategy, feel free to reach out my team. Thank you for the trust and confidence that you have placed in us.
Disclaimer:
Stocks are measured by the Standard & Poor's 500 Composite Index, an unmanaged index considered representative of the overall U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. Stock price returns and principal values will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.