If you’re worried about how the upcoming elections could impact the markets, you’re not alone. This year’s election is likely to be more contentious than the 2000 election between George W. Bush and Al Gore (a process that took over five weeks to resolve and saw the S&P 500 drop more than 8%). Numerous lawsuits have already been filed in state courts by both parties and we’re weeks from election night. With an expected increase in mail-in ballots, we won’t likely know the winner until days after the election. Even after that, we could see legal challenges that could take weeks to resolve. That type of uncertainty could spook the stock market.

Despite Biden’s current lead in the polls, anything can happen in the coming weeks. Hypothetically though, I’ll present some pros and cons for the markets should we see the biggest change from our current party control: Biden wins the presidential election while Democrats keep the House and win the Senate.

Two of the things that Wall Street dislikes are tax increases and restrictions on businesses. Biden has already said he’d raise taxes for businesses, raise taxes for the highest wage earners, and raise the capital gains rate among other tax changes. Additionally, given the rollback in business and environmental restrictions that President Trump has made over the past three plus years, it’s highly likely that Biden would look to restore many Obama-era policies. Wall Street could view this negatively and we could see stocks drop if the Democrats sweep in November.

That said, Wall Street might like a change in Washington. Wall Street doesn’t seem to agree with Trump’s tariff policies. Typically, when new tariffs were announced, the market went down. When it appeared as though tariffs would ease, the market went up. It’s possible that Biden seeks a different trade resolution with China and our allies that Wall Street finds more settling. We may also see quicker approval of stimulus funding. While Wall Street might not like the total cost of a Democrat-led stimulus, providing money for people to spend and helping to shore up businesses could be greeted by approval from the markets.

It’s hard to say what exactly could happen to the markets as a result of the elections. Remember that the evening after Trump won the 2016 election, the markets dropped about 4%. Since then, the S&P 500 is up over 73%1.

Whether it’s fear about BREXIT, Greece going bankrupt, oil dropping from $60 a barrel into the teens, or even a presidential election, there’s often reason to worry that the markets could drop in the short term. If you’re investing in stocks, you should be doing so for your long-term goals. The markets may have periods of a month, six months, a year, or occasionally more when they decline yet the markets have historically performed well over the long term.

If your goals are long term and you believe that the markets/economy will be in a better place in 3, 5, and 10 years down the road, then stay focused on the long term. If short-term fluctuations in the market scare you or if you need money in the short term, then consider adjusting your investment mix to suit your risk tolerance and goals.

If you’d like a free assessment of your risk tolerance, you can go to our website at www.partnershipwm.com and click the Free Portfolio Risk Analysis button on the right side of our homepage.

1 Source: Morningstar.com 11/10/2016-10/13/2020

Past performance is no guarantee of future results.

Stock investing involves risk including loss of principal

All referenced indices are unmanaged and may not be invested into directly.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.

Diversification and asset allocation do not protect against market risk.

The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual.  Consult your legal, tax, and/or financial advisor to determine what is appropriate for your situation.

As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them work towards their financial goals. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started: www.partnershipwm.com.

Author Profile

Woody Derricks, CFP®
Woody Derricks, CFP®
Throughout my nearly 20 years as a Financial Advisor, I have seen some of the best and worst markets in our history. That experience allows me to approach my clients with the knowledge of how the markets fit into their greater financial picture. At Partnership Wealth Management we help everyday people who have accumulated wealth make sense of what they have and work with them to maximize their financial opportunities in a relaxed, comfortable, and professional environment. While we help people from all walks of life, many of our clients are same-sex couples searching for a knowledgeable, LGBT-friendly financial advisor to help them with their unique financial planning needs. I am a CERTIFIED FINANCIAL PLANNER™ professional and have the Accredited Domestic Partnership Advisor(sm) designation. As a Registered Investment Advisor, we are not tied to any company’s investment products allowing us to provide unbiased advice by offering a wide array of investments and other products to our clients. Since 2001, I have been writing articles on financial planning for several regional newspapers and have been a guest speaker on LGBT financial issues for various local and national organizations. Additionally, I have conducted financial planning workshops for large corporations and government agencies. Non-Profit Work I believe that it is important to give back to the community and currently serve as the treasurer for FreeState Justice and as a co-founder/president of Paws for a Cause. I’m a current member of several LBGT, environmental, and local community groups. Personal My wife, Heidi and I enjoy camping, hiking, and traveling with our daughter, Elise, and our dogs, Fenway & Roxy. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.