Trending
No pun intended with that headline, but with Election Day fast-approaching, intensity is increasing in significant fashion and that’s true across a variety of avenues.
There’s the much discussed elevated activity in betting markets not to mention all the talk about which financial assets could be winners under a Kamala Harris or Donald Trump administration. Of course, there’s also the amplification of partisan bickering with Election Day less than two weeks away.
Increased political bickering isn’t just the result of the proximity of Election Day. It’s also a byproduct of the U.S. being a highly divided country politically speaking. That’s a fact and it’s a reminder to advisors that attempting to change hearts and minds when it comes to politics is juice that isn’t worth the squeeze. If anything, it could be a business loser, not a source of attraction.
Still, advisors are confronted by another fact: clients of both political persuasions and independents are pensive about how the upcoming election will affect their portfolios. From that skittishness, it can be inferred that advice and guidance are what clients want – not a visit with an advisors that feels like a cable news show.
What Clients Need to Hear
There are two principal points advisors should make with clients as it relates to elections. First, a person’s political leanings color their opinions of the economy. For example, polls indicate that Republican voters currently hold more negative views on the economy than their Democrat counterparts. During President Trump’s first term, that scenario was reversed.
Second, and this is something many clients don’t realize because of the way some experts frame economic/financial market performance, is the point that on a historical basis, stocks aren’t as affected by what party controls Congress and the White House as many investors are programmed to believe.
“Even though many investors may see links between election outcomes and the performance of the market or their investments, the fact is that stocks have historically performed well no matter which party controls the White House or Congress,” notes Nationwide’s Mark Hackett. “But as we quickly approach Election Day 2024 and the partisan divide among voters remains as wide as ever, the likelihood of investor anxiety grows. Higher anxiety could create more volatility in the market and contribute to emotional investment decisions.”
Said another way, things are never as bad as they appear to be and, moreover, remaining invested through various political cycles is often the best course of action. Forecasting election results and making investment decisions based on those hypotheses amounts to market timing – the quintessential fool’s errand.
More Than Ever, Advisors Matter
Owing to the fact that election year jitters aren’t confined to a particular political ideology, advisors are as important as they’ve ever been.
That’s not to say their relevance will decrease on Nov. 6 – it won’t – but the next week or so is the ideal time for adivsors to help clients set reasonable expectations while reducing election-related stress.
“While it may be hard for investors to tune out the election noise in the next few weeks, the best guidance they can get right now is to focus instead on the real drivers of financial market performance—the economy and corporate earnings, not election results,” adds Hackett. “A recent Advisor Authority survey found that a majority of investors—Democrats, Republicans, and Independents—said that working with a financial professional during an election year helps them feel more secure. This guidance may be just what clients need to lessen the impact of the political divide.”
Related: Rising Longevity: A New Challenge for Advisors and Clients