What Does the Election Mean for Your Investments?

It is said that the stock market climbs a “wall of worry.” That has certainly been the case this year — many things have folks worried. One concern we hear is the upcoming election. It sure seems as if every Presidential election is more divisive than the last. But when all the votes are counted, what does it mean for your investments?

Generally speaking, there is always a subset of the population that is left disappointed, thinking that if the candidate who opposed the one they supported wins, all will be lost. When it comes to financial markets and history, that is not the case. Returns tend to be positive no matter who is in office. The victor usually does not make major policy changes — though tax, regulation, and spending plans can have long-term ramifications.

This is not to say there won’t be volatility. The market often responds to short-term emotion. While we often observe that, heading into late October in election years, there tends to be a pullback, it is usually followed by a fourth-quarter rally later in November.

Many economists believe fiscal policies espoused by BOTH candidates will aggravate the current record deficits. This is likely to increase borrowing demands. These policies will likely affect both bonds and interest rates, depending on how monetary policy responds.

While history suggests it is prudent to stay the course from a big-picture standpoint, new trends are always emerging. We will continue to monitor developments and propose changes as necessary. If you have questions or thoughts about the election, the economy, or how November 5th might influence the markets, do not hesitate to call our office to speak with your advisor.