Just when it feels we cannot pack anything else into 2020. We are now less than 90 days from the election. Emotions are running high with all the uncertainty in 2020, and we are starting to receive questions about the election and changes to investment portfolios.
The most common question we have been hearing is,
Should you adjust your portfolio based on the upcoming election?
The resounding answer is no. There are too many uncertainties to seriously tilt portfolios one way or another. Perhaps an adjustment is in order if the asset allocation has not been rebalanced, but making wholesale changes to a properly allocated portfolio does not make sense. There are too many uncertainties, including:
- Who will be president?
- Will the House or Senate turn Republican?
- Will the House or Senate turn Democratic?
- How will the virus affect the ability to govern after the election?
We are reminded of when Bill Clinton was elected president. Many investors thought we have got to get out of the markets because he’s going to be a spender and entitlements will go through the roof. When President Clinton began his term in office, financially he moved from the left towards the center. The equity markets took off for the next eight years of his presidency. If portfolios had been adjusted based on what many thought was going to happen, long-term growth would have been missed.
You will find a lot of charts online breaking down the stock market performance across each political scenario. Many articles will try to show that one party has done better than the other over some period. We have looked at those charts, and none of them convince us to change our allocations or start tilting portfolios every 2 or 4 years.
Why?
The stock market is driven by long-term fundamentals like corporate earnings, interest rates, labor growth or unemployment, productivity, and economic growth not the election cycle. Long-term investors should not be making determinations based on two-year or four-year political cycles.
Our recommendation is that investors maintain a diversified and coordinated investment allocation across all their accounts. The allocation should be based on goals, long-term time horizon, and risk tolerance. This election season, make sure to vote, keep calm, and stay healthy!
We’d love to discuss more with you if you’d like. Please email info@apwealth.com or call (706) 364-4281. Please remember that the information contained in this post is for informational purposes only and should not be construed as investment advice or an endorsement of a specific security or other investment.