By Bryan Trugman, CFPⓇ
As you head to the ballot box in the next election, it’s fine to let your attitude toward the economy influence your vote—but remember, the president has far less control over the economy than you might think. When it comes to your investments, the impact of a presidential election is even less statistically significant.
In other words, whether you vote for Kamala Harris or Donald Trump, it’s not likely to cause major shifts in capital markets.
Sure, presidential elections can stir up some short-term market volatility, but if you look back over the last 100 years, the market’s long-term trend has been upward. The only exceptions? The Great Depression, World War II, the tech bubble burst, and the Great Recession.
As an investor, the presidential election might influence policies and global events worth monitoring, but when it comes to your investments, sticking to a strategy crafted by a savvy financial advisor (like our team at Attitude Financial Advisors) and focusing on the usual market movers is the smarter play.
What Power Does the President Have Over the Economy?
Presidents of both major U.S. political parties get credit and blame for good and bad economic conditions during their terms. They get more than their share of both when you consider the power—or lack of power—a president has over the U.S. economy.
The president certainly plays a role in the economy. A president can influence the direction of the economy through executive powers and proposed policies. However, a president’s direct control over the economy is limited by several factors and institutions.
Trade and other economic policies often take time to be implemented, so changes under one president might not be felt in the broader economy until the next president’s time in office. Another factor and institution, the U.S. Congress, holds the purse strings.
Congress approves budgets and spending. Any influence the president wields there depends on which party is in the White House and which ones control the House and Senate. But those factors don’t always hold true either.
And on monetary policy, the president appoints the head of the Federal Reserve, which has a more direct effect on economic matters that affect your pocketbook. But even then, the president’s appointee must be confirmed by Congress, and the Fed acts independently.
Avoid Presidential Election Impact on Investments
Worrying about the presidential election impact on investments is nearly equivalent to trying to time the markets. It’s a short-term event that creates volatility and elicits similar emotional responses to market conditions. No one can predict the future.
Even historical market data do not guarantee returns, but following fundamentals in election years and non-election years has a solid track record. Continue to look for:
- Corporate profits
- Economic growth
- Inflation
- Productivity
- Standard of living
Trends in the economy and inflation have a stronger relationship with market returns than election returns. Above-average long-term returns have been associated with rising economic growth and falling inflation, and falling growth and rising inflation have been associated with below-average returns.
Making investment decisions based on your prediction of the election’s impact on investments is no different from making an investment decision based on emotional responses to market swings.
Talk to an Advisor Today
If your attitude about how the presidential election might affect your investments is worrisome, it’s a good idea to talk with a financial advisor. Discussing your investment horizon, risk tolerance, and goals can help you navigate any potential impacts on your portfolio and maintain a winning attitude about your finances.
At Attitude Financial Advisors, we’re here to review your strategy and help you decide whether to stay the course or make adjustments.
Reach out to me via email at btrugman@attitudefinancial.com or give me a call at (516) 762-7603 to set up a free consultation.
About Bryan
Bryan Trugman is managing partner, co-founder, and a CERTIFIED FINANCIAL PLANNER® practitioner at Attitude Financial Advisors. With more than 16 years of experience, Bryan specializes in addressing the financial needs of new parents as they seek to realign their finances, assisting divorced individuals as they navigate an unforeseen fork in the road, and strategizing with those seeking to accrue a dependable retirement nest egg. Bryan is known for being a good listener and building strong relationships with his clients so he can help them develop a customized financial plan based on what’s important to them. He is passionate about helping his clients experience financial confidence so they can worry less and play more. Bryan has a bachelor’s degree in industrial and systems engineering with a minor in mathematics from State University of New York at Binghamton. He has served on the board of the Financial Planning Association and continues to be actively involved in the national organization. He is also a member of the Plainview-Old Bethpage Chamber of Commerce and has served as its vice president and as a board member. When he’s not working, you can find Bryan on the ballroom dance floor or engaged in a fast-paced game of doubles on the tennis court. To learn more about Bryan, connect with him on LinkedIn. Or, watch his latest webinar on: How Much Is Enough? A Surprisingly Simple Way to Calculate Your Retirement Savings Needs.
