Advice for Your Portfolio in the Weeks Leading Up to the 2020 Presidential Election
2020 has certainly proven to be quite the election year. First, we’re in the middle of a contentious presidential election between President Trump and former Vice President Biden. Second, our country - and the world - is in the midst of a global COVID-19 pandemic that has sent the stock market on a roller coaster ride, cost millions of Americans their jobs, shuttered many businesses and industries, and even infected President Trump. Finally, there’s the uncertainty about mail-in ballots and current Postal Service delays, and whether or not our country will even be able to declare a winner in the presidential election on November 3rd or if it will take days - or perhaps even weeks - later to know who will be inaugurated in January 2021.
With all the uncertainty surrounding the upcoming presidential election - as well as the potential for a Senate flip if Vice President Biden and Democratic Senators win - many of our clients are coming to us to ask what changes - if any - they should be making to their portfolios in the weeks leading up to the 2020 Presidential election. We’ve written this blog post to offer you our advice.
Now Is Not the Time for Major Changes to Your Portfolio
As an experienced New Orleans area financial advisor, I’m here to tell you that it’s never a good idea to try to time the market, especially when you’re working on building long-term wealth and financial stability for retirement. And that’s particularly true right now.
While all of my clients have different risk tolerance levels, I am constantly focused on helping them create balanced portfolios based on those unique risk profiles. If you’ve already been working with me, then you know this is true from our regular update meetings. We believe your balanced portfolio is your best defense at any potential market downturns in the upcoming weeks and months due to the 2020 presidential election.
Why You Shouldn’t Try to Time the Market
During his first term, President Trump has lowered taxes, and until the COVID-19 pandemic hit our country, the stock market was yielding record returns. Some economists are concerned that former Vice President Biden’s plan to increase taxes if he wins the election will result in a stock market drop.
But it’s important to remember that given that the Senate is currently controlled by Republicans, even if Biden wins the presidency, he will be unlikely to pass any tax increases unless this upcoming election flips the Senate to Democratic control. And even though former Vice President Biden is currently leading in polls, we all know how unreliable polls can be. Since none of us have a crystal ball, we shouldn’t try to predict what will happen with the presidential election and down-ballot voting and make big changes based on what the polls are currently reporting.
What Can You Do to Stay Financially Sound with Current Election and Pandemic Uncertainty?
Whether your portfolio includes retirement accounts like 401(k)s and IRAs, or non-retirement accounts for bridge investing, there are a few universal tips we recommend you follow until the dust settles from the 2020 presidential election. They are to:
● Keep Your Emergency Fund Stable
Having an emergency fund is always a must. As we anticipate market volatility during the weeks leading up to the presidential election (and perhaps the weeks and months afterwards), having a beefed-up emergency fund is more important than ever. If you’ve had to dip into your emergency savings during the pandemic, we recommend you reduce your discretionary spending as much as possible to add to your emergency savings. Depending on your personal and family situation, you should have at least three to six months of expenses in this account. If you need help determining how much to save in your emergency fund, we’re happy to meet with you to discuss a game plan based on your unique situation.
● Pay Down Any High-Interest Debt
If your emergency fund is stable and you have money remaining in your monthly budget, we recommend you use those funds to pay down any high-interest debt you may have, such as credit cards with high APRs. Focusing on debt reduction will help you save from paying high-interest payments in the months to come, which may have some increased market volatility.
● Consider Refinancing Your Home to Take Advantage of Historically Low Mortgage Interest Rates
2020 has brought the banking industry historically low mortgage interest rates. Depending on your current mortgage rate, you may be able to save significantly on your monthly mortgage payment by refinancing right now. Reducing your mortgage payment will also help free up cash flow so you can focus on emergency fund savings or paying down high-interest debt*
Contact Us if You Have Any Questions
We know that the uncertain times we’re experiencing can create confusion, anxiety, and fear regarding your nest egg. As your trusted financial advisors, we’re here to explain our current market and economic situation to you. If you have any questions about your portfolio or current financial position, we’re happy to meet with you. To schedule an appointment, call our offices today at (985) 792-5232.
*Raymond James Financial Services and your Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.
There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past Performance does not guarantee future results.