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Financial Planning, Investing
Sep 2020

Financial Planning for the Election

By Alex Black, CFP®, Ken Cranstone, CFP®

On November 3rd we as a nation will determine who will lead our country for the next four years, Donald Trump or Joe Biden. Regardless of your thoughts on either candidate, this election feels different. The world is different. Naturally, you may be asking yourself, if everything else is different right now, what should I do about my portfolio, or my financial plan? Our answer is that the election should not influence your portfolio or your financial plan.

Regarding presidential elections, many articles have been written attempting to decipher whether there are any correlations between political parties and market performance. Most reach the conclusion that there isn’t a great deal of compelling evidence to suggest that one political party is associated with better market returns than another. The research is robust, so rather than generate our own analysis, we’d recommend looking at the following links which summarize the data in a digestible format:

  • Presidential Elections & Stock Market Returns. Fidelity’s Jurrien Timmer slices and dices market performance over presidential cycles beginning in 1789, and concludes that generally over full presidential terms an investor can expect positive market performance regardless of the president’s political affiliation.
  • 3 Mistakes Investors Make During U.S Election Years. Capital Group highlights three common mistakes made by investors during U.S. election years, and offers ways to avoid these pitfalls and invest with confidence in 2020.
  • How Presidential Elections Affect the Stock Market. This article was actually posted back in 2016, but the discussion itself is rather timeless. An interesting tidbit at the end postulates that the stock market is more adept at indicating the direction of an election than an election is at indicating the future direction of the stock market.

When it comes to your investments, instead of worrying about who will be in the White House for the next four years, we encourage you to focus on your own financial circumstances. Are there any major changes that you expect in your life? Do you want to retire? Is there a major expense, or purchase on the horizon? Are you looking to move to a new state? These are things to build a plan around. Whether we are in a Bear or Bull Market, or have a Republican or Democratic President, it should be your financial needs that drive your investment decisions.

The election is almost upon us. While the US stock market will likely continue to reward long-term investors, and while the outcome of the election will not change the way we provide advice, it will determine how our communities, states, and our country are run.

If you’re wondering how to make your vote count in the 2020 election, we recommend checking out FiveThirtyEight’s Voting Map for rules and guidelines for your state.

If you’re wondering what our investment advice is at this time, we recommend remaining diversified, keeping an eye on the long-term, and staying in touch regarding changes in your life.

Be safe, stay informed, and make your voice heard.

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