Trending
Save for some House and Senate races that have yet to be called at the time of this writing, the 2024 election season can now be put to rest. For many advisors, clients and investors, the sentiment is “good riddance” and understandably so.
Sure, there’s no denying that equities like the results of the presidential contest. The S&P 500 gained 2.53% on Wednesday. Bonds, not so much. Ten-year Treasury yields rose 3.19% in the first post-election trading day. One day of price action doesn’t necessarily mark the beginning of a new trend and it pays to remind clients of that fact.
Speaking of clients, the post-election period could be an ideal time for advisors and clients to reconnect because clients are likely to have questions and want insight as to what 2025 might have in store. That’s not to imply that advisors need crystal balls, but as the composition of Congress becomes more clear, that could stoke more client inquiries.
Fortunately, post-election checkups don’t require rehashing election results or political discourse. These conversations should be strategy sessions that focus on planning for the upcoming year.
Focus on the Basics
To borrow a football phase, post-election client interactions should focus on “blocking and tackling” or the fundamentals. Remember that while result of the presidential election is applicable to the entire country, one-size-fits-all approaches won’t cut it with clients.
“Effective financial planning requires nuance, as there is no universal solution that fits all client circumstances,” notes Nationwide’s Mark Hackett. “Objective guidance from a financial professional is indispensable for investors who want to achieve the goal of a secure and comfortable retirement.”
There is one element of uniformity when it comes to post-election discussions regarding retirement planning. There was considerable talk during the campaign that President-elect Trump will employ tariffs against some of the major U.S. trading partners. There’s also some inside consensus that the talk is just a bargaining tool.
Still, it’s worth preparing for the worst and the worst-case scenario would be tariffs are implemented, stoking inflation in the process. That would diminish the allure of bonds and cash in retirement portfolios.
“Over a retirement span of 27 years or more, an overreliance on cash and bonds may fail to keep pace with inflation, increasing the risk that investors will struggle to meet expenses such as health care costs,” adds Hackett. “Moreover, younger investors are likely to spend more years in retirement as life expectancy gradually increases, meaning more years of living expenses during retirement to plan for.”
Focus on the Basics: Part II
It’s policy not candidates that typically affect risk assets meaning that if the Trump Administration is successful in extending the tax cuts implemented in 2017 while potentially adding more reductions to that list, it could be a boon for equities.
Time will tell, but there is validity in keeping clients focused on the long-term and that includes an emphasis on balanced portfolios with leans toward equities over inflation-sensitive assets.
“As the dust settles on the 2024 election, investors should take this time to meet with their financial professionals, conduct a portfolio check-up, and reassess their risk if needed,” concludes Hackett. “It’s also a good opportunity to define or refine their retirement investment plans and discuss other important financial matters, such as the impact of potential tax law changes on their portfolios.”