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How Do I Position My Portfolio for an Election Year?

How Do I Position My Portfolio for an Election Year?

February 16, 2024
How to Position Your Portfolio for an Election Year

Q: How does market performance typically vary during election years compared to non-election years?

A: The data presented in the discussion indicates that market performance during election years, particularly during the primary season (January to May), can be volatile due to uncertainty. However, historical trends show that the market tends to rebound positively following the conclusion of primaries, regardless of whether it's an election year or not. This suggests that short-term volatility may present buying opportunities for long-term investors.

Q: What strategies are recommended for investors during an election year?

A: It's important to have a solid plan in place and not succumb to the noise and uncertainty surrounding elections. Strategies such as staying fully invested, employing dollar-cost averaging, rebalancing portfolios, ensuring tax efficiency, and exploring alternative investments were recommended to mitigate risk and potentially enhance returns during election years.

Q: How does political uncertainty impact investor behavior?

A: Political uncertainty often leads investors to become more conservative, potentially leading them to move their investments into cash or adopt a wait-and-see approach. However, we recommend that staying invested and adhering to a long-term plan is generally more effective. We recommended focusing on the fundamentals of investment planning, rebalancing portfolios to manage risk, and considering alternative investments to diversify and potentially enhance returns.

Q: What are the key considerations for investors in terms of tax efficiency and asset allocation during an election year?

A: Tax efficiency and asset allocation are crucial factors for investors during an election year. Strategies such as tax loss harvesting, asset location, and ensuring the appropriate placement of assets in taxable and tax-advantaged accounts were recommended to minimize tax liabilities and optimize investment returns. Additionally, exploring alternative investments beyond traditional stocks and bonds was suggested to diversify portfolios and potentially enhance returns in the current market environment.

Q: What are some key takeaways from investing during an election year?

A: First, there's a significant amount of uncertainty in election years, which can lead to market volatility. Second, historical data suggests that regardless of which party is in power, the market tends to perform positively over the long term. Third, investors often become more conservative as an election approaches, but this may not be the most effective strategy. Staying invested or employing dollar-cost averaging techniques can yield better results. Finally, having a solid plan, rebalancing portfolios, tax efficiency, and considering alternative investments are all crucial factors for navigating election year volatility.

Watch the full video HERE.

T.M. Wealth Management is a registered investment advisor.  This content is for educational purposes only and is not legal or tax advice.  All should consult their own legal and tax professionals.