Presidential Election, Volatility, and the Long View
Article written by Brian Bickett
The presidential election is looming next week and, considering the many surprises 2020 has already brought us, the outcome of the election is shrouded with uncertainty, speculation, and angst. Beyond how the election winner will certainly attempt to guide political, social, and environmental policies, there is a considerable amount of concern for investors regarding how the election will impact the economy, investments, and ultimately their formal or informal financial plans.
First and foremost, for the near-term, investors should expect increased volatility, in both directions, thru the end of the year. We are already seeing today what is likely the beginning of significant daily market movements. The markets seem to enjoy uncertainty even less than we as individuals do and it seems more and more likely that the outcome of the election will not be clear on the morning of November 4th. Record numbers of mail-in voting and possible recounts and court rulings will likely contribute to the delay in the official announcement of the winner. The most recent contested presidential election was the Bush vs. Gore election battle back in 2000 where it took five weeks to know the outcome of that race and the market volatility continued thru the end of the year. While the tech bubble was bursting in 2000, we instead get to deal with the hour-by-hour reporting of the challenges currently facing this nation. While every time is truly different, there are similarities that point to how the rest of the year may play out. However, short-term volatility will likely have very little effect on the long-term outcomes addressed by a properly developed and monitored financial plan created with a 30+ year time horizon.
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Second, lifting our eyes from what remains in 2020 to what the next four years might bring, the eventual winner of the election will drive policy decisions in 2021. Presidents tend to want to strike while the iron is hot and use the momentum from the election to push for the policy change most important to them in their first year in office. While the direction of the policy push will be significantly different depending on the winner, they both will likely face the inevitable bureaucracy, compromise, lobbying, and politics associated with Washington. At the same time, markets do not always behave as we expect them to. While one candidate will likely push for less regulation and the other for more; economic stimulus, infrastructure projects, and increases in taxes are likely to be on the horizon for either winner. A properly developed investment policy and financial plan should take into consideration these factors and have the flexibility to adapt as needed.
And finally, in the context of a retirement investor’s likely 30+ year time horizon, one of the keys to contentment is focusing on those daily areas that we can control and on where we can have influence. Regardless of our political leanings, we all need to cast our vote and then, as individuals, we have absolute control of where we focus our time and energy. Iron Mountain Financial Planning, LLC clients are keenly aware of my philosophy on the importance of having purpose in our lives regardless of the stage of life we are in. We all should have a reason to get up in the morning; have purpose, structure, and flexibility in our day; and believe that the future truly is full of opportunity and promise. We live in the greatest country on the planet and, while 2020 has presented so many challenges (impeachment, pandemic, negative oil prices, protests & riots, forest fires, presidential election, etc.), I am optimistic that we will overcome them. And my hope is that you are optimistic too.
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