It’s hard to believe that 2024 is more than halfway through. Lo and behold, it’s a presidential election year, too. November 5 is rapidly approaching.
Whenever an election year rolls around, our trusted advisors tend to get a lot of questions from our customers about how to invest intelligently in the face of political uncertainty. We’ve found that many customers assume that the stock market, retirement plans and the performance of other investments may swing wildly depending on who wins the election.
Plan ahead
Even though the recent political climate seems to be fueled by emotion, it’s essential to keep the fundamental rule of smart financial planning in mind: No matter which candidate you plan to vote for, it’s imperative to make financial decisions using your mind rather than your emotions. That can be a difficult task, which is why our financial advisors are always happy to recommend strategies to help you pursue your long-term financial goals.
So, what does a sound financial strategy look like in the face of an unpredictable political future? This may surprise you, but election results generally don’t affect mid-range to long-term stock market performance.
Keep fundamentals in mind
As this article from U.S. Bank1 explains, the results of presidential elections don’t have as much of an impact on the market, 401k plans and other investment strategies as many people might think. There are certainly some key policy considerations to keep in mind that influence short-term performance in some sectors, but it’s not wise to radically change your financial planning due to “political preparation.”
Instead, it’s important to keep the fundamentals in mind, such as diversifying your investment portfolio to help reduce risk and optimize your overall returns. Furthermore, as we’ve discussed at length in a previous blog post2, there is a more-predictable change lurking on the horizon that could impact your finances much more than the coming election.
Namely, the Tax Cuts and Jobs Act of 2017 will expire December 31st, 2025, meaning that federal income tax rates will increase for most Americans in 2026. In some cases, the time may be right to consider a Roth IRA conversion3, as the money you put into a Roth IRA now will likely be taxed at a lower rate now than it will be in the future.
Next steps
Ultimately, the adjustments you make in an election year are ideally kept as minimal as possible. The ideal approach for you will depend entirely on the financial instruments you are using, the unique mix of holdings in your stock portfolio and the structure of your retirement plan.
At Financial Services of America, we are happy to help you navigate the changes you should – and shouldn’t – make to your financial plans this election year. While we don’t advise making dramatic changes to your financial plans, we certainly advise having a solid plan in place.
No matter where you are in your financial journey, we are here to help you chart the ideal path forward. Simply contact us today, and let’s start building the ideal financial plan for your very own goals.
Disclaimer
Insurance products are offered through the insurance business Financial Services of America (FSA). Financial Services of American (FSA) is also a Financial Services practice that offers securities products and services through AE Financial Services, LLC (AEFS), member FINRA/SIPC. Financial Services of America (FSA) is also an Investment Advisory practice that offers investment advisory products and services through FSA Advisors (FSAA), a Registered Investment Advisor. AEFS and FSAA do not offer insurance products. The insurance products offered by Financial Services of America (FSA) are not subject to regulatory requirements and standards of care applicable to registered representatives and are not subject to investment advisory requirements. AEFS, FSAA and FSA are not affiliated companies. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. 3776535-8/24
1 “How presidential elections affect the stock mark.” U.S. Bank Wealth Management. July 22, 2024. www.usbank/wealthmanagement/financialperspectives/marketnews. Accessed August 8, 2024.
2 “Why it’s Smart to Start Tax Planning in July” Financial Services of America. July, 2024. https://fsa1.com/why-its-smart-to-start-tax-planning-in-july/
3 “Is a Roth IRA Conversion right for me?” Financial Services of America. November, 2023. https://fsa1.com/is-a-roth-ira-conversion-right-for-me/