As we find ourselves in October 2024, with another presidential election on the horizon, investors are understandably curious about how potential political shifts might impact their financial plans. At CWM, we aim to help our clients navigate these periods with a balanced, long-term perspective.
Current economic landscape
- Economic indicators:
- GDP growth: The GDP growth rate is 3.1% year over year and estimated to be 3.1% in the third quarter of 2024.
- Unemployment rate: 4.2% as of August 2024. The September jobs report is due to be out tomorrow, October 4, 2024.
- Inflation: The most recent Consumer Price Index (CPI) shows a 2.5% annual inflation rate as of September 11, 2024.
- Interest rates: The Federal Reserve's benchmark rate was reduced by 0.5% and is currently between 4.75% and 5%. An additional rate cut of 0.25% to 0.5% is expected at the November meeting.
- Global factors: The recent missile attack against Israel has led to increased market volatility. We are closely monitoring the situation, anticipating Israel's response in the coming days.
Potential post-election scenarios
While we cannot predict election outcomes or their exact market impacts, historical trends provide some insights:
- Divided government: Historically, markets have often performed well under divided government (different parties controlling the White House and Congress). This scenario can lead to policy gridlock with some level of bipartisanship required to enact changes. Markets often view this as a stabilizing force.
- Single-party control: When one party controls both the executive and legislative branches, we typically see more significant policy changes. This can lead to increased market volatility in the short term as investors adjust to new regulations or fiscal policies.
- Sector-specific impacts: Certain sectors may see more direct effects based on proposed policies:
- Healthcare: Potential changes to healthcare legislation could impact insurance and pharmaceutical companies.
- Energy: Shifts in environmental regulations or energy policies may affect traditional and renewable energy stocks differently.
- Finance: Changes in financial regulations could influence banking and investment firm stocks.
- Market expectations: Historically, market performance has been driven predominantly by companies' abilities to grow earnings rather than by legislative policies. While legislative changes can influence business environments, corporate earnings growth has shown resilience across various policy landscapes.
Strategizing financial plans
- Maintain long-term focus: Your financial strategy should align with your long-term goals, regardless of short-term political shifts.
- Diversification remains key: A well-diversified portfolio can help mitigate risks from policy changes that may disproportionately affect certain sectors.
- Consider tax planning: While avoiding reactionary moves, it may be prudent to review your tax strategy with your advisor, considering potential policy shifts.
- Stay informed, not alarmed: Keep abreast of policy proposals, but avoid making drastic portfolio changes based on campaign rhetoric alone.
- Regular portfolio reviews: Use this time to ensure your asset allocation still aligns with your risk tolerance and long-term objectives.
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Remember, elections are cyclical events in a much longer economic and market journey. By maintaining a disciplined approach aligned with your personal goals, you can navigate these periods of uncertainty with greater confidence.
At CWM, we are committed to helping you maintain perspective and adjust your strategy as needed during election seasons and beyond. To discuss how potential political changes might impact your financial plan, please contact us.
This content is provided for educational purposes only, represents only a summary of topics discussed, does not constitute any personalized investment advice or recommendation, and represents only the views and opinions of the speakers which are subject to change without notice. Investing involves risk including the potential loss of all amounts invested.
This material prepared by Certus Wealth Management, LLC (“Certus Wealth”) is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Opinions expressed by Certus Wealth are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Certus Wealth, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Certus Wealth does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.