How Much Should You Invest Before the Election?

It’s been a crazy election year, and we’re still more than three months out from Election Day. Strap in tightly, because the craziness has only just begun.

Instead of focusing on Crooked Hillary or what Trump will say next it will be better for your sanity if you focus your energy instead on how all of this is going to impact your investments. Fear not. I have the breakdown you need to navigate the murky waters of this election year.

The Current State of Things

The year did not start well. A recent increase in interest rates coupled with overwhelming international uncertainty, especially from China, set January up to be a very discouraging month.

On top of that, the election season started to really get going, and we can all remember how crazy the primaries were.

Yet, with all of the insanity, things have been looking very good this summer. While growth is not the most explosive the country has ever seen, increased employment and wages, steadily growing stock markets and an all-time-high S&P 500 are all very encouraging.

In fact, many analysts are happier with the slow and steady progress than they would be with the “bubbles” of the early 2000s.

Basically, the U.S. economy has weathered as much uncertainty as the world can throw at it without really batting an eye. It just keeps chugging forward. Of course, a regime change can always throw a wrench in things.

Traditional Election Years

The country has seen enough election cycles to provide excellent data. Historically, election years are slower than the years immediately preceding or following them, but they still average net growth.

Obviously this doesn’t mean that every year will blindly follow the trend, but we can see that the turmoil and heightened emotions of an election year slow investments and returns.

So far this election has been particularly uneven and emotional, so the threat of a slow year is very real, but the trend of recovery coupled with the surprising steadfastness of markets so far this year make that a less frightening prospect than it normally would be.

Anticipating Change

Ultimately, if you want to be a savvy investor, you have to anticipate the markets. In this case, you need to be able to plan for either outcome. It’s pretty reasonable to expect the next president to be either Hillary Clinton or Donald Trump. We’ll tackle Clinton first.

Hillary is a pretty moderate Democrat. Under her, we can expect things to progress much as they have with Obama. A slow, measured policy grind will enable the economy to keep climbing, but don’t expect any surges forward.

Interest rates will likely be raised very carefully, and tax structure will remain largely the same. Questions of healthcare policy are in the air, but any change Hillary would try to push would take the better part of a presidency to see effect, so a second Hillary term would have more impact on your investments than an initial term could.

Really, from a stock market perspective, her election would have little to no impact on your long-term portfolio.

Trump is another story. The one thing we can see with certainty is that the GOP dislikes him almost as much as the Democrats. The biggest takeaway here is that any radical changes that come from his office will be met with opposition in Congress.

He may be able to broker some deals, but the bulk of his platform will be bogged down and heavily revised back towards the center before congress will approve. So, once again, you can’t fear too much change from a Trump presidency and your long-term investments are in little to no danger.

Making Smart Choices

Despite all of the hooplah, the elections this year will have minimal impact on your portfolio. They’ll bring uncertainty, and that will accompany some market dips, but the long game still looks promising.

One of the most important ways to beat those dips is to avoid emotional investing. This is a rule regardless of the year, so stick to your guns and follow your plans.

As for the subtle tweaks, watching the elections around Congress are more important than the presidency. A shift away from Republican control could lead to large minimum wage increases, increased taxes (especially on capital gains) and more aggressive regulations for major industries and corporations.

Keep an eye open and move some money around if you need to, but don’t hurry into those decisions. None of these changes can be passed quickly.

So, let’s answer the big question. How much should you invest this year?

You should stick to your long-term plans. Don’t let the craziness of an election scare you away from good decisions that have been working thus far.

Regards,

Ethan Warrick
Editor
Wealth Authority


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