When people think of the upcoming election, they can’t help but worry about the market volatility it is likely to cause if a certain candidate wins. They wonder if they should put all of their money in cash “just in case” the markets are affected. With 2008 still fresh in everyone’s minds, as well as the impact that Brexit had on the markets recently, people are concerned that this election will do a number on their portfolios.
So, do you move your money out of the markets or not? If you are worried about how the outcome of the election will affect your investments – don’t panic! Rather, take this opportunity to review your current financial plan.
Here’s what you need to think about:
STRATEGY
Make sure that your current plan aligns with both your short term and long term goals and asses your risk tolerance. Unless one of these things changes, don’t change your strategy.
SPECULATION
It’s nearly impossible to time the market correctly. What if you decide to sit on the sidelines in cash and the market goes up? Or, what if the market does go down, how do you know when to get back in? No crystal ball can tell you when those moments will happen. Decide on a course of action based on what makes sense for your goals and timelines, not on speculation.
ASSET ALLOCATION
Make sure your portfolio supports both your short and long term goals. As you get closer to retirement, you should already be changing the asset allocations in your portfolio, especially as you go from your 40s into your 50s and into retirement. As you get closer to retirement you should be adjusting into a more conservative investment strategy. If your time horizon has gotten shorter, make a shift based on that, not because the election is coming up. Reviewing your allocation may also uncover a rebalance of your portfolio that you may have missed. Money that you plan to use for a short-term goal in anywhere from three to five years, should not be too heavily invested in the stock market.
There will always be market volatility. Sometimes it will be due to an upcoming election, and other times it will because economic activity around the world. If you’re properly invested for your time horizons and your goals, trust that your strategy is working toward something long term in a way that makes sense for you.
A few things we might expect from a Clinton win:
- an increase in corporate taxes (not necessarily market friendly)
- higher capital gains tax (not necessarily market friendly)
- higher income tax on high wage earners (not necessarily market friendly
I would also watch the biotechnology and pharmaceutical industries (due to proposed cuts in the price of pharmaceutical drugs).
A few things we might expect from a Trump win:
- lower taxes
- increase in spending on infrastructure (leading to higher deficits)
- potentially strained relations with other countries due to proposed tariffs
I would be careful investing in bonds and global companies.
If you are interested in a review of your portfolio to make sure you are not over exposed in any of these areas, call our office 845-371-0101.
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