Q & A: Will the Presidential Election Affect the Economy?
By: Stacey Nickens
With COVID-19 dominating the news cycle, you may have forgotten about the upcoming November election. Many states will vote on governors, representatives, and senators, and the country at-large will vote in the presidential election.
Presidential elections can generate anxiety and uncertainty about the markets and related investment matters. Some of your own political beliefs may also be informed by your economic perspectives. Because of this, presidential elections often feel like turning points in the economy.
However, it’s important to remember that the White House does not have exclusive influence over economic policy. Many presidential moves get held up in the legislative and judicial branches, slowing down change. While different candidates may opt for different economic policies, the market impact of different policies will neither be immediate nor uniform. Some sectors may benefit while others may drop. Either way, just like in the COVID crisis, there will always be opportunity for investment and growth.
Additionally, there are many factors that influence the financial markets, especially right now. Traditionally, the stock market performs strongest in a President’s third and fourth year in office. Presidents often advance unpopular policies earlier in their term, then slow down as they approach re-election. However, with COVID-19 and other major events, the stock market has not necessarily followed historical trends. Instead of overly focusing on the election, I encourage you to account for the long-term picture. Stocks may take a short-term dip because of a campaign’s rhetoric or policies, but these political market impacts aren’t necessarily lasting. If you react to macro events, you may miss out on long-term gains and opportunities.
Finally, it’s simply always important to diversify your portfolio and focus on holdings that will perform strongly no matter the person in office. For example, consider Clorox stocks. People will continue to buy Clorox regardless of the election outcome. The returns of these companies are driven by consumer demand, and thus, it’s more important to focus on company performance rather than election events.
I’ve been advising clients to take a deep breath heading into November. Presidential elections don’t have a uniform impact on the financial markets, and there are so many other considerations at play. There will always be opportunity, even in the most difficult times, and I remain dedicated to helping my clients achieve their financial goals.
However, if you still have any questions or concerns, I encourage you to make an appointment. I can review your financial picture with you and help you find areas for success in these challenging times.