Treece Talk Blog

As the 2024 election season continues full throttle, financial markets are preparing for a riveting yet nerve-wracking ride. Historically, elections have significantly impacted the stock market, and this year is no different. This economic uncertainty, political divisiveness, and upcoming policy changes can make navigating the money market stressful, leading to emotional and impulsive financial decision making.

Hold On: It’s Going To Be A Wild Ride

Numbers don't lie—markets thrive on stability, and elections often bring the opposite. In the last election cycle, the S&P 500 had daily changes of up to 5%. This shows the high volatility that can come with political uncertainty.

This year's razor-thin margins and contentious issues promise similarly dramatic market movements. For some investors, this roller coaster is a thrilling opportunity, but for others it can be a gut-wrenching experience.

Swing States 2024: Political Uncertainty and Your Finances

The 2024 election is one of the most heated in our country’s history. Swing states will be more closely analyzed than ever. Candidates fiercely contest these states, often with narrow margins, and they can determine the election outcome. As campaigns fight for these swing states, it can cause market ups and downs. Investors often react to changes in poll numbers and possible policy shifts.

Both candidates' budgetary and economic positions are being closely monitored by the markets. 

Former President Donald Trump’s policy positions, such as permanently extending the expiring provisions in the 2017 Tax Cuts and Jobs Act, enacting trade tariffs, and expanding deregulation may significantly impact the economy and market value.

Vice President Kamala Harris’ take on the budget and economy includes raising the corporate tax rate, reducing taxes on low- and middle-income households, and creating new subsidies to support homeownership.

As election day gets closer, the market may change. Investors might react to talks about keeping or changing these policies. This situation highlights the importance of maintaining a strong financial plan that can adapt to political and economic shifts.

Managing Market Volatility

In a potentially volatile market, understanding which stocks may experience significant price swings is key. Sectors such as technology, energy, and biotechnology are often more volatile due to their sensitivity to market conditions, regulatory changes, and innovation cycles. For instance:

• Technology Stocks: Tech companies may see significant price fluctuations due to changes in innovation, competition, or market sentiment.
• Energy Stocks: Oil and gas companies are particularly volatile because of their sensitivity to political events and changes in global supply and demand.
• Biotech Stocks: These stocks can be highly volatile due to the binary nature of drug approvals and regulatory decisions.

Given the current political climate and potential policy shifts depending on the election outcome, these stocks may be even more volatile beyond 2024. A well-diversified portfolio can help mitigate these risks.

Key Focus Areas During Election Cycles

To navigate the months ahead, consider focusing on the following areas:

• Tax Policies: Changes in tax policies can significantly impact corporate earnings and stock prices. Stay informed about potential tax policy changes to anticipate market shifts.
• Healthcare Policies: Healthcare reform is a major election issue. Proposed changes can affect healthcare costs and the financial health of companies in the sector. Monitoring healthcare policy discussions can provide insights into potential market movements.
• Trade Policies: Trade relations and tariffs are often key topics in election debates. Changes in trade policies can influence the performance of global corporations and sectors reliant on international trade.
• Border Policies: Border policies and immigration reforms can have substantial economic implications, affecting labor markets, consumer spending, and business operations.

Strategies to Stay On Track for the Long-Term

• Focus on Fundamentals: Long-term investment performance is driven primarily by economic fundamentals. Companies with strong earnings, solid balance sheets, and competitive advantages are likely to perform well over time, regardless of political outcomes.
• Stay Diversified: Diversification is key to managing risk during volatile periods. Spread your investments across various asset classes, sectors, and regions to mitigate the impact of market fluctuations.
• Avoid Timing the Market: Trying to time the market based on election outcomes is risky. Studies show that time in the market is more important than timing the market.
• Revisit Your Financial Plan: An election cycle is a great time to review your financial plan. Ensure your asset allocation aligns with your long-term objectives. Consult with a financial advisor to adjust your plan if needed.
• Stay Informed, Not Overwhelmed: Keep up with political and economic developments from reliable news sources, but avoid being overwhelmed by sensational headlines. It’s important to keep a clear-eyed perspective to make objective financial decisions that benefit your bottom line.

Stay Calm, Stay Informed, Stay Secure

As election day approaches, it's natural to feel anxious about potential market impacts. Staying focused on long-term goals, diversifying, and understanding basics can help you handle election worries confidently. Market ups and downs are normal in investing. Sticking to your financial plan can help you reach your long-term goals.

If you're concerned about how the election and its aftermath might affect your financial plan, Team Treece is here to help. 

Schedule a complimentary consult. Together, we can strategize to keep you on track to meet your financial goals, no matter what the future holds.

Related Resources:

Cetera® Investment Management: Trump vs. Harris: Navigating the 2024 Presidential Election

Rethinking65: Most Worried About Election’s Impact on Their Retirement

Fast Company: For Many Americans, Social Security Worries Steer Voting In Presidential Election