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Election Season is here. As a citizen, you may be keenly interested in what happens in November. But as an investor, should you be equally concerned?
It’s certainly true, of course, that elections have consequences, and that the people in power can pass laws that may have either a direct or indirect impact on financial assets and investment strategies. So, for example, changes in how certain investments are taxed could affect your choice of investment vehicles. Or, a major government program, such as a big investment in infrastructure, could boost the fortunes of specific industries – construction, transportation, energy, etc. – which, in turn, would make these industries more attractive investment targets, at least for a while.
After the fact, it’s not that hard to see how these types of political decisions affect various elements of investing – but it’s difficult to predict these developments. In the first place, many campaign promises go unfulfilled. And even those that enter the legislative process may exit it in a vastly different form, so that the ultimate effects are far different than what might have been intended.
Furthermore, you can’t really make any blanket predictions of how the financial markets will fare if one party or another captures the White House, as the president’s party has not been shown to have a statistically significant impact on U.S. stock market returns.1 And the markets have performed either more or less favorably under various configurations of party control of the White House and Congress (i.e. Democrat/Democrat, Democrat/Republican, Republican/Democrat and Republican/Republican).2
So, instead of trying to forecast what might or might not happen, depending on who wins the elections, think of ways you can improve your investment outlook, no matter what’s going on in Washington. Here are some suggestions to consider:
Elections come and go, and laws change all the time. As an investor, you shouldn’t ignore these events, but you won’t want them to dictate your decisions, either. In the long run, try to “cast your ballot” for those choices that can enable you to make progress toward your important goals. For help in making these moves, contact an Edward Jones financial advisor.
1 Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs: Federal Reserve Board: “Alternative Estimates of the Presidential Premium” (pdf)