You might think that getting an email from your broking about what the election means for your money is about as personal and emotional as getting birthday wishes from your dentist’s office. But you should pay attention to what the biggest money managers say and don’t say about how the election could affect your retirement savings and the economy as a whole.
Together, the big broking firms are in charge of trillions of dollars. Most workers are affected by these firms in some way, as they are the providers of their 401(k) plans and the places where they keep their IRAs and other saves. Some people don’t talk to their broking very often, but when the economy is bad or there’s a big event like an election, they might check on their life savings to make sure they’re still on the right track.
A lot of work goes into putting out teaching materials for their customers all the time, but they do it even more during times of trouble, and this election season is definitely one of those times.
The most important thing for them is to let their customers know how they are handling things. As portfolio managers, they are always buying and selling holdings to try to get the best yield. Then, they share some of that information with their clients to reassure them and give them a plan for when they decide to spend on their own.
These are the things that the best firms have to say about your money and the election.
Trustworthiness
There is a special section on Fidelity’s website about the election that gives you general investing tips and also talks about how certain problems could affect your money. It’s important for the company to stress that markets are not political and that no one can say for sure what will happen after an election. If a politician said something during the campaign, that doesn’t mean they will be able to make it law when they are in office. Naveen Malwal, an institutional portfolio manager, said, “That could be a risky way to manage your money if you get ideas from these kinds of proposals.”
Fidelity wants you to do something, right? The main lesson is to pay attention to what’s going on and not change your mind. Jurrien Timmer, a global macroeconomic policy expert at Fidelity, said, “Elections tend to have less of an effect on the markets than politicians may like to believe.”
The Guard
Vanguard tells its clients the same thing about the election: it doesn’t matter much when it comes to your finances, but it does matter when it comes to the election. To make this point, Vanguard looked at data going all the way back to 1860 and found that elections had no effect on the success of a portfolio that was 60% stocks and 40% bonds. That’s right, Vanguard found no increase in volatility in the months before an election, which is when you might expect it to happen. In the end, Vanguard says, “Presidential elections are events that make a lot of news, but they shouldn’t make you change your financial plan.”
After reading more than one of these comments, you can get a sense of what’s not being said. It sounds like people are scared, and everyone else knows it, but there’s no real-life link to anything bad that has happened or is about to happen.
Charles Schwab
In his election speech, Charles Schwab starts with a chart that shows how compound investment growth has been going up since the time of John F. Kennedy and is still going up today. The same $1 you put in back in 1961 would be worth $590 now.
The main idea is to put money away for the long run. Don’t take your money out and hide it under your mattress until you think the danger is over. That was the lesson that wasn’t said.
There are also a lot of experts on Schwab who can give you advice on how to invest in a way that makes the most of the current situation and how different policies might affect the business. Liz Ann Sonders, managing director and chief investment strategist, and Kevin Gordon, director and senior investment strategist, write an article in which they look in depth at different industry sectors and conclude that elections don’t really affect the economy as much as other factors. “Yes, tech has been the best performer for three election years (though 2024 isn’t over yet, of course),” they said. “But it also fell sharply in 2000 and 2008, with an average performance of 3.6% across all election years, which put it in seventh place.”
The JPMorgan Chase
There are a number of ways that JPMorgan Chase is telling its customers about how the election might affect their money. These include articles and webinars from the company’s different investing units. Customers can get a list from J.P. Morgan Asset Management that walks them through the steps of the voting process and the issues that matter. Taxes are at the top of the list.
In four years, will your taxes be different? Should you do anything now to protect your assets from possible changes in taxes in the future? What will happen if the current tax rules run out at the end of 2025?
All of these are good questions, but right now no one has an answer because it depends on who wins the election for president and how the new Congress is put together. The company also breaks down the different policy options for eight other tax problems, but they don’t have a Magic 8-ball. Its best answer is, “Political views should be voiced at the polls, not in a portfolio.” One of the most important rules for investors to follow is “Don’t let how you feel about politics affect how you think about investing.”
