Trending
Election Day is about three weeks away and with it clear that this race and many down ballot contests will be nail-biters, clients rightfully feel some angst. That’s amplified by the easy accessibility of political news and opinion, particularly on social media. Look hard enough and one is bound to find headlines with which they agree and plenty that make their blood boil.
While history shows that election results’ effects on stocks generally fade by the end of a president’s first year in office, many clients don’t see that forest through the trees. Arguably, that’s result of politics being a personal matter to some people and the point that the U.S. is a highly divided country, politically speaking. That partisanship seeps into how clients view potential electoral outcomes.
Consider the findings in a recent Nationwide Retirement Institute survey. More detail to follow, but in abbreviated terms, respondents have gloomy economic outlooks if the party they DO NOT support has power following Election Day.
Partisan Views Affect Economic Views
Likely owing to the deep political divide in this country, clients fear the worst should the party they oppose control the White House and Congress following Election Day. Fifty percent of those polled by Nationwide believe under that scenario, their cost of living will increase over the next year while 34% believe taxes will rise and a recession will come to pass.
That line of thinking is difficult territory for advisors because smart advisors know a couple of things. First, talking politics with clients is risky. After all, the advisor runs the risk of irking half the client base with these discussions. Second, if the objective is to grow the practice, as it should be, how clients vote should be the last thing on an advisor’s mind.
Where advisors can and should help is helping clients understand that the best and worst case political effects on the economy and markets are unlikely to come to pass.
“Many investors may need this reality check in the weeks leading up to and after Election Day,” observes Nationwide. “It is important that all investors—no matter their political inclination—be aware of their emotional biases when making financial decisions. The objective guidance they get from you as a financial professional can make a big difference.”
Reality Check Merited
“Reality check” might sound like a harsh phrase, but it’s something advisors ought to consider with clients leading up to and after Election Day. For example, the Nationwide survey indicates 60% of those queried believe the results from the 2024 elections will have a lasting impact on stocks, but the reality is likely to be much different.
That’s up from 45% in the same survey a year ago and that could be a sign of variety of things, including clients not being enthused by the choices for president and partisanship coloring investors’ views. The silver lining is that history shows remaining invested is perhaps the best way to deal with election outcomes and that those results are unlikely to have profound consequences for stocks over the long-term.
“But the historical data shows this is not likely to be the case. While the press may describe this year’s presidential race as ‘unprecedented,’ it is more likely that history will repeat itself,” concludes Nationwide. “Markets may experience temporary volatility around elections, but like most short-term news events, this volatility has little long-term impact on financial outcomes.”