Four years ago I had no plan. Donald Trump was the surprise winner of the 2016 presidential election, and I wasn’t entirely sure what to say to people on the verge of losing their minds.
In the early hours of November 9, 2016 – when futures trading indicated that the US stock market would fall very sharply when it opened – I tried to encourage the discouraged. Keep betting on capitalism, I advised. You can still rest assured that you are providing investors with the same long-term returns they have had in decades.
Then, within hours of the opening bell in the United States, there was a reversal. Shares rose this Wednesday. That reassurance column I wrote in the middle of the night needed revision.
So this time I write things down before election night. And during the day I had conversations with financial planners who had worked for both Republicans and Democrats in government jobs in previous careers. They provided some helpful pointers.
First, a kind of maxim about our collective state of anxiety – whether you move on for another four years or a new resident in the Oval Office. “Emotions are really good at asking questions and really bad at answering them,” said Zach Teutsch, a financial planner in Washington, DC. It is true in life and it is certainly true in financial decisions. Try to stop doing big ones soon.
Second, it’s easy to overestimate how much change there is in the first year of a presidential term, especially in things that can hit your wallet right in your wallet like taxes, retirement rules, or health care. Mr. Teutsch learned all of this during his time at the Consumer Financial Protection Bureau, where he worked from 2013 to 2017.
As Mr Teutsch says, many government employees spend their careers focusing on a single problem within a particular policy area that they would like to fix. You make plans and have memos in your back pocket and are ready if the legislature, executive or judiciary split up.
“Most of the time, you think and wait for those brief moments when you can move that thing around to fix the problem you were obsessed with,” he said. His patience tried enough that he found another job.
But here’s the problem for the politicians, and for those of us who pay the taxes they employ: only a tiny fraction of them can finally do their thing during a presidential administration, and it’s impossible to predict who will get their shot or how successful they will be. It would be stupid, for example, to fundamentally change your pension strategy in order to expect a change in one or the other tax rule.
But what if Joe Biden wins and the Democrats regain majority in the Senate? Don’t assume anything, warned René Bruer, who worked for Jeb Bush when he was governor of Florida and Republicans controlled both houses of state law.
“Governor Bush told us not to bet on laws that were passed or failed based on Republican policies,” said Bruer, now Colorado Springs financial planner. “He said you will be very surprised.”
While it feels like a long time ago, let’s not forget the thumbs-down moment from John McCain who sank the legislation that Obamacare would have gutted in 2017. That was a memory with a party that controlled both chambers and the presidency. Even two years of control over Congress and the White House might not be enough to accommodate a long list of legislative requests. Now imagine if the chastised Republicans reformulated their votes to the electorate and retook the house in 2022, again dividing the government.
Mr. Bruer is a Marine Corps veteran who spent part of his childhood in Africa watching people burn banks on their way to school. He actually comforts himself with what to others feels like an increased level of chaos in the American government.
“The past few years have taught us a good lesson from the power of bicameral legislation, and the judiciary equals the executive,” he said. “You have to come up with good ideas, and it can take a while. It should be so loud. “
All of these can be cold comfort when experiencing existential fear. Your citizenship status may be unclear, or you may have an existing illness or work in an industry decimated by the coronavirus, or you may have lost your job. Mere words can’t erase your deserved fear, although I hope they can take the edge off.
But you may be lucky enough to have less important concerns. Perhaps you are focusing on the short term direction of the stock market and the money you have invested in it. Take a moment to step back and remember why you are investing in the first place.
Shares can lose a lot in value in a short period of time. But over decades, they usually deliver enough growth for you to achieve long-term goals, such as: B. retire and be able to live on money. However, this only happens if you have the courage (and the discipline and any leftover income) to save regularly and not pull out money when you believe something scary is about to happen.
If you have money in stocks that you need in the next few years, this is a good time to reconsider – but not because of what might happen on Tuesday or the way politics or politics might affect the markets. It’s just better to put money that you know you will soon need into something less volatile.
“We want growth-oriented investments in that part of a person’s portfolio that they want to keep for the long term so that we don’t have to worry about what will happen in the event of an election,” said Teutsch.
Then focus on the things that you can control. This is the first line of the script that Mr. Bruer uses for clients who just want to get out of the markets for now, regardless of whether their team will win. He then asks if there are any fundamental health or professional changes that might require a change of course.
If not, the conversation continues with some reminders and a basics review. “Do you have a finance and investment plan? Yes. Are your investment costs low? Yes. Diversified? Yes, ”he said.
Simply remembering your own good planning can be reassuring.
And if the stock market has been good for you – from the Obama administration to the Trump administration – there may be some money left for others whose paths have been more rocky. In this area, Mr. Teutsch hopes that his customers will consider a possible change in strategy.
“Following an election can be a good time to evaluate your social impact plan, particularly with regard to community strategies,” he said. “Because the world needs very different things, depending on who wins.”