11/1/2024
The Election & Your Portfolio: Navigating Uncertainty in 2024
By: Nate Wyatt
The 2024 presidential election is upon us and many investors may feel a sense of unease regarding their portfolios. However, historical data suggests that the performance of financial markets is not significantly influenced by which political party is in power. Instead, it is crucial to focus on broader economic trends and maintain a long-term investment strategy.
Understanding Market Dynamics
The stock market is primarily driven by corporate earnings, which are influenced by macroeconomic factors rather than political affiliations. The U.S. economy's inherent dynamism allows businesses the opportunity to grow regardless of shifts in fiscal policy. While tax and spending policies can impact growth, they are just one piece of a larger puzzle that includes global trade, technological advancements, and consumer behavior.
Historical analysis shows that periods of weak market performance are often linked to major economic events, such as the Tech Bubble or the Global Financial Crisis, rather than the political party in power. Therefore, amidst the noise of election rhetoric, investors should concentrate on the underlying economic indicators that drive long-term growth.
The Role of Tax Policy
As we head into the election, tax policy is becoming increasingly prominent in the political discourse. With significant tax changes scheduled for 2025, including potential sunsets on provisions from the Tax Cuts and Jobs Act (TCJA), investors should consider how these changes might affect their portfolios. Both candidates have proposed different approaches to tax policy, which could have varying implications for businesses and individual taxpayers.
For instance, while one candidate supports extending TCJA provisions for lower-income earners, the other aims for permanence in tax cuts. The outcome of the election will likely influence future tax legislation, making it essential for investors to stay informed and adaptable. See our article for more details on TCJA here.
See below for a summary of key topics under discussion in the election and 2025, along with the positions both candidates have publicized either recently or in the past:
Topic |
Harris |
Trump |
|---|---|---|
| TCJA | Extend TCJA provisions for those earning less than $400,000 |
TCJA permanence
|
|
Tariffs
|
Increase tariffs on China & Mexico on specific items | Tariffs: 10% baseline on all goods and 60% on Chinese goods |
| 2024 Proposal | CTC expanded: $3,600/child or $6,000/newborn | Business provisions from 2024 bill |
| Corporate Tax Rate | Corporate tax rate increase to 28% | Corporate tax rate reduction to 20%, or 15% for domestic manufacturers |
| Housing |
|
|
| Inflation Reduction Act (IRA) | Maintain IRA credits, $100M in grants for Energy Department - electric vehicle (EV) manufacturing | IRA, at least partial repeal |
| Aid to Working Class | Tip taxation exemption |
|
| Personal Tax Effects | Increase top individual tax rate to 39.6% | 529 savings expansion |
*Source: Forvis Mazars. "2024 Election Series: Presidential Candidate Policy Comparisons." Forvis Mazars, 2024, https://www.forvismazars.us/.
Strategic Planning in Uncertain Times
Given the unpredictability of election outcomes and their potential impact on tax policy, investors should adopt a proactive approach to portfolio management. Here are some strategies to consider:
- Diversification: Ensure your portfolio is diversified across various sectors and asset classes to mitigate risks associated with political changes.
- Focus on Fundamentals: Concentrate on companies with strong fundamentals that can weather economic fluctuations, regardless of the political landscape.
- Tax Planning: Stay informed about potential tax changes and consider how they may affect your investments. Consulting with a financial advisor can help you navigate these complexities.
- Long-Term Perspective: Maintain a long-term investment strategy. Short-term market fluctuations driven by political events should not derail your overall investment goals.
- Monitor Economic Indicators: Keep an eye on macroeconomic trends, such as employment rates and consumer spending, which can provide insights into market performance.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
As we approach the end of 2024, it’s vital for investors to remain focused on the bigger picture rather than getting caught up in election-year noise. By understanding market dynamics, preparing for potential tax changes, and adhering to a sound investment strategy, you can navigate uncertainty and position your portfolio for long-term success.
In times of change, staying on the course with a well-informed and strategic approach should support your financial goals.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
*Sources: Forvis Mazars. "2024 Election Series: Presidential Candidate Policy Comparisons." Forvis Mazars, 2024, https://www.forvismazars.us/.
Forvis Mazars. "The Election & Your Portfolio" Forvis Mazars, 2024, https://www.forvismazars.us/.
ART Tracking #: 650437-03-03
