It’s October, and it’s time to think about how the outcome of the election could impact our economy, our markets and, of course, YOUR money. Even if the election doesn’t go your way, your financial success is in your hands.  Here’s a few ideas to help you make the most of the financial opportunities that might present themselves over the next few months:

• Protect investments from market volatility traditionally surrounding elections, both before and after;
• Utilize tax minimization techniques on retirement accounts while tax rates are still low;
• Don’t wait to make needed portfolio adjustments in the hopes the market will be higher just before or after the election in November; and
• Remember not to overreact to the tax proposals floated by the candidates!

 

But first, be sure you are familiar with the fundamentals:

 

1. THE FED:

The biggest question in the markets in September was whether the Fed would cut rates. Well, it did, and the rate cut made big news since it was the first and the biggest cut since March 2020 when COVID-19 was hammering the economy. The cut celebrated a victory over inflation, which peaked at 9.1% in June 2022, and fell to 2.5%. And there may be another (smaller) cut on the tail of this one later in the Fall.

Keep in mind, Fed policy has more influence over short-term rates than long-term rates. With debt and deficits likely to remain high under either party, and the Fed reducing its footprint in the Treasury market, the government will need to find buyers for its debt.

With the Federal Reserve expected to lower interest rates again later this Fall, many investors are facing renewal rate risk. If you’ve been benefiting from the current high-interest-rate environment, those same returns may not be available to you toward the end of the year. You may have bought a CD that’s been performing well, but it’s maturing this Fall – be sure to work proactively with your TFG Financial Advisor to find a way to help you lock in an attractive rate of return for future months.

Looking long term, the age of fiscal austerity may be over regardless of which party wins in November and occupies the White House in January of 2025. Spending priorities between infrastructure, social services and defense will vary depending on the election results, but it appears unlikely that fiscal restraint will be a priority in Washington for the future.

 

2. THE ELECTION:

You also may want to consider rebalancing your portfolio if you’re taking on more risk than necessary. While Wall Street tends to perform well in the long term following election years, investors may experience some volatility in the short term leading up to November. Now is a great time to look at your portfolio and make sure you have a long-term strategy designed to withstand market fluctuations.

There is an old saying that “markets are not red or blue, they are green.” It doesn’t matter who’s in office, markets care only about what the legislative policies will be. This is reflected in the market performance leading up to Election Day rather than market performance post-election. In every election year since 1980, except for two, markets moved higher after Election Day. The two exceptions were 2000 and 2008, remember what was happening then? Sectors typically perform based on the stage of the economic cycle we are in, as well as other macro factors. Buying real estate because you think either Trump or Kamala is going to win or lose may not be wise.

 

3. CANDIDATE TAX POLICIES:

Traditionally, we think of Democrats as spending more and taxing more. We assume Republicans want to tax less and spend less. Often the reality is quite different. Most of the proposals we have seen to date from both sides are spend more and tax less.

A key issue for voters and the markets is taxes. The Tax Cuts and Jobs Act (TCJA) that went into effect in 2018 has two components: corporate and individual. The corporate side is permanent. The individual side is temporary because making it permanent would have created too big a deficit to pass the bill. Trump is in favor of making the tax cuts permanent. Democrats want to do the same thing for those taxpayers making less than $400,000. In both cases, the taxes would be lower than they would be if those provisions of the TCJA are allowed to expire.

 

4. ELECTION HISTORY IS ON YOUR SIDE:

It can be tempting to sell stocks and move to the sidelines until election results are finalized. Historically, giving in to that temptation has been unwise. The S&P 500 has generated positive returns in 20 of the 24 election years since the beginning of the index. Of course, we must point out, past performance is not a reliable indicator of future performance.

 

5. GOVERNMENT POLICY CAN HELP OR HURT SECTORS, BUT FUNDAMENTALS STILL MATTER FOR STOCKS:

Energy policy is a clear area of distinction between both presidential candidates. Donald Trump is likely to be more friendly to domestic oil and gas production, with Kamala Harris will be more likely to favor additional spending on renewable energy. Industrial companies may benefit under either party, as both candidates prioritize bringing manufacturing back to the United States.

China will be a target of tariffs and trade restrictions regardless of the election outcome. China has ample room to retaliate, creating elevated risk for multinational companies and those in the US with substantial revenues from China as well as US companies relying on China-based supply chains and resources.

Don’t overreact to the tax proposals suggested by the candidates. Tax policy may be more influenced by control of Congress than by who wins the presidential election. Major changes in tax policy would require a clean sweep by one party, which is a possibility but not likely at this time.

Reach Out To Us: Do elections really influence the direction of markets? Some pundits think so, but investors should resist the impulse to make major changes solely in response to the latest polls or policy pronouncements. Successful investors consider elections alongside a wide variety of factors that influence markets while staying focused on maintaining a sound long-term asset allocation and investment strategy. You can’t control the election outcomes or what the market may or may not do. But you can work with TFG Financial Advisors to build your own retirement strategy and create a portfolio that revolves around the lifestyle you want.

 

TFG Financial Advisors, LLC, is registered as an investment adviser with the SEC. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time. All investment strategies have the potential for profit or loss.

TFG Financial Advisors, LLC, is registered as an investment adviser with the SEC. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. It is not affiliated with or endorsed by the Social Security Administration or Medicare. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time. All investment and insurance strategies have the potential for profit or loss. Information presented is believed to be current. Photos and videos are used for the singular purpose of enhancing the website. None of them are photographs of current or former clients. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours.