I know, I know... this time is different, Eric! This guy, [insert candidate], is such a [insert scary descriptive] that if he wins we're headed for an absolute collapse. Even if I'm wrong, I just think I'd rather not have my money in the stock market because I think it's going to tank because everybody knows how bad it would be if he won.
I'm going to skip right to it. This is a story told by biased pundits to scare you into voting for their preferred candidate. They are intentionally divisive and historically wrong. This election, we even get the benefit of having already experience 4 years (well almost) of each candidate.
Here is the performance of US Large Cap equities through each of the candidates terms in office:
Source: Morningstar, Edward Jones
It's not that you shouldn't be concerned about who wins the presidency. Election outcomes are incredibly important for so many reasons. Supreme Court nominees, policies affecting our taxes, our social safety nets, our families, our healthcare... all of these things are incredibly important. You should vote and you should encourage others to vote.
You should also separate your portfolio from your politics.
Your strategic portfolio allocation should be based on just a few things: your risk tolerance, your time horizon, and some technical details such as tax management or ability to rebalance. None of these things change with a new, current, or former president.
There is something called tactical allocation, where you make changes based on certain economic conditions. This is making minor changes within a portfolios allocation like bond duration or growth vs value or domestic stock exposure. It does NOT mean timing the market or moving to cash based on politics.
If you're scared, I want you to know that I am too! Business & tax legislation can affect how I can feed my family. Social policies affect my family and neighbors ability to live with the same rights that I do. The Supreme Court is an incredibly strong part of our government that has become increasingly politicized and the President can make lifetime appointments.
So if you're scared, good! Vote! Encourage others to do the same. Meanwhile, trust that both domestic and global publicly traded companies will continue to operate with the intention of generating profit and rewarding their shareholders and they will likely find a way to do that regardless of who is in office.
My personal opinion is that if you're watching a TV personality or reading an author telling you that one candidate or the other is going to be the reason your 401k collapses, you should seek other sources. They are trying to scare you into supporting their agenda.
If there are specific outcomes you're afraid of, or if you're nearing retirement, or have to use invested money for certain goals in the near future, there may be changes to make based on strategy! Give us a call or schedule a time to meet so we can discuss. You shouldn't make changes based on politics, but if you need to avoid volatility, let's see if changes are appropriate while the market is in a good position!