Navigating the Election Minefield: Strategies for Investors to Weather the Storm

As the U.S. presidential election approaches, a majority of American investors are grappling with concerns about how the outcome could impact their personal finances. From retirement plans to stock market performance and tax policy, the potential implications have many investors on edge. However, financial experts advise that with the right strategies and a focus on long-term goals, investors can weather the storm and emerge stronger.

Empowering Investors to Overcome Election Jitters

Retirement Plans in the Crosshairs

The upcoming election has many investors worried about the future of their retirement plans. A recent survey by Wealth Enhancement found that 80% of respondents expect the election to affect their retirement plans in some way. Concerns range from the potential impact on Social Security and Medicare to the uncertainty surrounding high inflation and its effect on retirement savings.Financial advisors are urging their clients to stay focused on their long-term goals and not let the election noise derail their plans. "While there is technically some type of uncertainty involved with elections, it's relatively short-lived," says Megan Gorman, Managing Partner at Chequers Financial Management. "Advisors can help investors tune out the noise and stay focused on long-term goals."

Navigating Stock Market Volatility

The stock market is another area of concern for many investors, with nearly a quarter of respondents in the Wealth Enhancement survey worried about how the markets will fare after the election. However, historical data suggests that the impact of elections on the stock market is often short-lived.According to a T. Rowe Price analysis, the average annual returns for the S&P 500 in election years (11%) are not significantly different from non-election years (11.6%). "We believe that investment decisions should be based on longer‑term fundamentals, not near‑term political outcomes," the researchers wrote. "Trying to time the market based on short‑term dynamics, political or otherwise, is extraordinarily difficult."Financial experts advise investors to stay the course and not make rash decisions based on election-related volatility. "We've had 24 election years [since 1927]. And out of those 24, only four of those election years had negative [annual] market returns," says Jamie Bosse, a Kansas-based CFP at CGN Advisors.

Navigating the Tax Policy Minefield

The uncertainty surrounding tax policy is another significant concern for investors, particularly for high-net-worth individuals. The Tax Cuts and Jobs Act (TCJA) of 2017 is set to expire in 2025, and if Congress doesn't act, it could lead to significant changes in tax brackets and deductions.Gorman's high-net-worth clients are particularly worried about the potential impact on the state and local tax (SALT) deduction cap and the increased estate tax exemption. Catherine Valega, a Boston-based CFP at Green Bee Advisory, has been advising clients to consider a Roth IRA conversion before income tax brackets potentially change."Conversions are important to think about," Valega says, adding that investors should consider questions such as: "Do we do them this year? Can we squeeze them in next year? What do our tax budgets look like?"By staying informed, working closely with their financial advisors, and maintaining a long-term perspective, investors can navigate the uncertainties of the upcoming election and position themselves for success, regardless of the outcome.