If you’re even remotely engaged with this year’s presidential elections, there’s a good chance you have, ahem, a few concerns, a couple nagging doubts, and a handful of worries about the consequences of [WHATEVER CANDIDATE(S) YOU DON’T LIKE] taking office.
We are not here to discuss the vast majority of those concerns.
We are here to talk about one specific area of concern: your money.
And to be more specific, we are here to talk about how one specific area of concern—if you’re forgetful, again, that’s your money—might not necessarily need to be a concern, regardless of whether Vice President Kamala Harris, former president Donald Trump, or anyone else becomes the 47th president of the United States.
The Tea: The real (read: not primaries) presidential campaign season is only starting to kick into gear. That means any election-related financial stress will probably become even more pronounced as economic data becomes more scrutinized, as attack ads become more focused, and as we obsess over every last political poll.
WealthUp Tip: One way to stress less about your savings is to set a concrete monthly goal.
So, why don’t we start with a snapshot of how stressed we already are before things really heat up?
A recent MarketWatch Guides Financial Stress Survey talked to 2,000 Americans about how finances are affecting their mental health. Some of the findings?
- 88% say they feel some level of financial stress.
- 65% say finances are their biggest source of stress.
- 64% reported feeling “financial fatigue.”
- 47% say that, financially speaking, 2024 has been the most stressful year of their lives.
Or, put more succinctly:
If we’re all a little keyed up to begin with, and if some of us just want to slam the “quit” button on 2024 already … well, let’s just say we could go without the extra stress of worrying about how the coming elections will impact our wallets and investments.
Fortunately, you don’t need to worry.
About that, anyways.
The Take: Maybe you think [WHATEVER PRESIDENTIAL CANDIDATE YOU DON’T LIKE] is going to send the economy in a tailspin. Maybe you think [WHATEVER PRESIDENTIAL CANDIDATE YOU LIKE] will help keep unemployment low, but you’re worried that [WHATEVER PRESIDENTIAL CANDIDATE YOU DON’T LIKE] has a better chance of winning, or that [WHATEVER PARTY YOU DON’T LIKE] will win Congress and keep [WHATEVER PRESIDENTIAL CANDIDATE YOU LIKE] from getting their brilliant policies through.
Good news: Nothing matters!
“People think presidents have more influence over the economy and fiscal policy than they actually do,” says Grant Gallagher, Head of Wellbeing at New Jersey-based Affinity Federal Credit Union. “And there’s this connection where they think the presidency will have an outsized impact on their own personal finances. But the connection between a president’s economic policy and an individual’s specific financials is loose at best.”
OK. “Nothing matters” is a touch too strong. But our worries dole out a little too much credit all around. We overestimate the ability of a given politician or even an entire political party to enact their will, and we also overestimate our own ability to predict how certain scenarios will play out.
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As a for-instance, it’s typical in the financial punditry world to believe that a particular president or even party will be better for the stock market than another. But history shows that, while there are indeed performance differences depending on which party runs which parts of the federal government (and while stock market performance has varied widely under different presidents), no permutation of Washington control signals an automatic hand-brake for Americans’ portfolios.
“Election years tend to be just another short-term event you have to weather,” says Kassi Hyde, ChFC, Wealth Management Advisor at Apollon Wealth Management, a South Carolina-based financial planning and wealth management firm. “Historically, markets have continued to perform well no matter the president since the 1940s. Yes, there have been blips, but they’ve occurred under both parties, and they haven’t been longstanding.”
Indeed, we explored the connection between elections and stocks in a Weekend Tea earlier this year.
“The stock market has experienced growth under both Republican and Democratic administrations, regardless of whether the presidencies were controversial or not,” Kelly Bogdanova, vice president and portfolio analyst at RBC Wealth Management U.S., told us at the time. “Although there were challenging periods, such as during the 1970s under Presidents Nixon, Ford, and Carter, the overall trajectory of the market has been upward during the tenures of various presidents from both parties.”
But why?
“Markets aren’t nearly as emotional as we are about politics,” Hyde says. “Markets care about the unknown. If markets don’t know about [a candidate’s] agenda, if they’re new, it can make markets nervous. And if government is controlled by one party, the risk of new agendas is extreme. But when government is divided [the presidency, the House, and the Senate are split in any way between the two parties], the risk of new agendas getting pushed through is much lower.
“‘Nothing tends to get done,’ we say, but honestly, that’s a good thing for markets.”
But even if the government isn’t split, and one party can ram many of its policies through, that’s still no guarantee reality will turn out like we think. That’s because there are so many other factors—from interest rates to consumer preferences to technological advances—that can come into play.
“I don’t tend to tell clients to delve into specific sectors in election years,” Hyde says. “Experts try to predict that based on who wins or who has a majority, how they might perform in one area or another, but every time you try to predict these things, they don’t work out exactly as expected.”
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“For instance, we tend to see energy as a sector that can be influenced politically one way or another. When Trump won in 2016, people thought energy would be a top performer because of the Republican Party’s view. But in 2017, energy was the second-worst performer out of the 11 sectors, and one of only two sectors that were negative. It didn’t play out as one would expect. We’ve also seen that in EVs under [President Joe] Biden.”
This same logic largely applies to anything else that could factor into your finances—changes in the tax code, let’s say, or health care policies.
None of this is to say that the next president, or the makeup of the next Congress, will have no impact whatsoever on your wallet. They might! But they likely will have less of a direct impact than most people fear, not to mention, we ultimately don’t actually know how any future policies will pan out.
Which means you should spend a lot less time worrying about what you can’t control (outside of voting, of course), and a lot more time taking the reins of what you can control.
“A solid financial plan and having solid financial fundamentals will help keep you afloat in turbulent times, whether you think the next president will impact your health care costs, put it in us in a recession, raise your taxes, etc.,” Gallagher says. “And given that we are still a few months away, if you truly do believe the president will impact your personal finances, you still have a few months to plan, adjust, figure out that worst-case scenario and correct for it.”
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That’s all from us this week! Be sure to check in next week, when we’ll tackle a related topic: How to deal with financial stress.
Riley & Kyle
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