November 2024
As we approach the next presidential election, investors may wonder about the potential market impacts and the appropriate strategies to employ. This article explores key considerations for an election year and highlights areas requiring careful thought.
Election-Year Volatility
What to Consider
Markets often see increased volatility in the months leading up to a presidential election as investors respond to shifts in political landscapes and policy proposals.
Election years may bring varied market returns; however, the link between elections and market performance is intricate and not straightforward.
What to Do
Prioritize the long-term perspective. Your investment strategy should be built for the long haul, spanning decades to cover retirement and legacy objectives, and not be overly sensitive to the four-year election cycle. If market volatility is a concern, reassess your risk tolerance and asset allocation within the context of your comprehensive financial plan, rather than making decisions based solely on election timing.
Policy Changes
What to Consider
The uncertainty of future fiscal and regulatory policies can cause stock price volatility and affect other asset classes, while also impacting financial and tax planning. Particularly, changes in tax policies should be considered when developing a long-term strategy.
What to Do
Concentrate on overarching themes rather than specific policy details. For instance, the anticipated expiration of the Tax Cuts and Jobs Act at the end of 2025 could lead to higher taxes for many. It’s essential to understand how such changes could affect your planning and to consider strategies like Roth Conversions or income acceleration before the law expires.
Expect the Unexpected
While the specifics of the 2024 election cycle are unpredictable, we can anticipate broader trends and plan accordingly. Tax planning should account for increasing deficits and scheduled legislative updates. Despite shifting specifics, overarching trends are likely to persist. Additionally, in a world where social media amplifies political discourse, it’s important to recognize that markets, businesses, and individuals adapt to succeed regardless of the political climate.
Conclusion
Presidential elections can trigger short-term volatility and uncertainty in the financial markets, but the enduring performance of these markets is primarily driven by broader economic fundamentals. By maintaining a diversified portfolio and collaborating with a trusted advisor, investors can confidently manage the uncertainties of an election year.
