How The Presidential Election Will Affect The Stock Market

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The election is making a lot of people anxious, including investors. What should you do with your equity portfolio as a result? The ever-wise Rick Kahler, who heads Kahler Financial Group in Rapid City, S.D., has some good advice:

As we get closer to Election Day, the most common question people ask me is, “What is the election going to do to my investments?” This is usually followed by: If Hillary Clinton and Donald Trump gets elected, “don’t you think I should get out now while I have a chance?”

It really doesn’t matter whether the blank is filled in with Clinton or Trump; many people think one or the other will mark the death knell of the economy.

I’ve witnessed these same concerns in other presidential elections over my 35 years as an advisor. People are always worried that if the candidate they dislike becomes president it will be devastating for the markets and their portfolio.

Are there some precautionary measures you should take to protect your retirement portfolio from an Election Day disaster? Let me share what I am doing in my personal portfolio to prepare for the worst: nothing. I don’t believe that whether Clinton or Trump wins will make any long-term difference to a diversified investment portfolio or the U.S. stock market. There is no past evidence to suggest otherwise.

I would expect most investment advisors to agree with me. But according to an article by Michelle Zhou in Financial Planning on Sept. 13, “Election jitters have advisers seeking liquidity for retirement plans,” I was surprised to find this is not the case.

The magazine asked 320 advisors, “How will the outcome of the U.S. election impact retirement planning, and what actions are you taking now?” I want to emphasize that the question focused on the impact to retirement portfolios, which inherently are long-term in nature. This wasn’t a question about how to play the market immediately before or after the election.

Apparently, most advisors believe this election will have a lasting impact on their clients’ portfolios. The article quotes one advisor as saying that, “Preparing our clients mentally and taking income-stabilizing precautions for our clients in retirement is a priority now.” Another said they are building larger cash positions “as the equity markets test all-time highs and we have such uncertainty regarding our future leader.” Still others said they are selling equities, putting more into liquid assets, and halting new investments altogether.