If clients are worried that the country may face a repeat of the tension following the 2020 election, Kris Maksimovich, the president of Dallas-based Global Wealth Advisors, asks them to remember that time and what the markets did in response.
According to Maksimovich, those clients are surprised when he reminds them that the S&P 500 rose 14.33% between Election Day and Joe Biden’s inauguration, despite the chaos. The S&P 500 rose 2.5% from 1/5/21 to 1/7/21, the day before and after the storming of the U.S. Capitol.
“Ultimately, they conclude that relating noise to market performance is more often than not a bad idea,” he said.
Maksimovich’s advice mirrors that offered to clients by several advisors who responded to WealthManagement.com inquiries.
As the country processes the results of the 2024 presidential election between former President Donald Trump and Vice President Kamala Harris, many are worried the next few weeks will contain protracted court battles and even the possibility of unrest or political violence.
Despite these fears, Raul Elizande, the president of the Sarasota, Fla. firm Path Financial, echoed Maksimovich’s plea to remember the stability of the markets despite past turmoil.
During President Barack Obama’s two terms, the S&P 500 gained about 170% (not including dividends), and under both Trump and Biden, the index grew around 60% each. Political divisions were deep under all those administrations, he noted.
“The moral is that investing according to one’s political convictions is fraught with danger, often leading investors down the wrong path,” he said. “This is especially the case now because the divisions run largely along cultural issues rather than economic issues, clouding the investment view.”
Alan Rosenfield, the managing director at Harmony Asset Management in Scottsdale, Ariz., said his firm created a video for clients charting long-term market performance. The video then highlights the points at which a presidential election occurred to show the little impact it had on the S&P index. He warned against making decisions based on an election or its aftermath.
“Now, if you turn it around and then say, okay, if so-and-so gets elected, or the other person gets elected, what are the long-term trends, or what do we think will impact those long-term trends?” he said. “Now, that’s a worthwhile discussion.”
However, Rosenfield cautioned that he wasn’t advising clients to focus on that now, as it would take time for an incoming administration to enact any policies.
Mitchell Freedman, the CEO of the California-based MFAC Financial Advisors, echoed the warning against trying to make a “Trump Trade” or “Harris Trade,” saying it was no different (or more successful) than trying to time the market.
“Aside from a good chance of doing the wrong thing, there could be substantial trading and tax costs that result from overreacting to what is likely to be just a bump in the road for the long-term investor,” he said.
According to Charles E. Helme, a managing director with the Miami-based BH Asset Management, the polling indicating a razor-thin race made extreme market results in either direction unlikely, as traders have considered the chance of both candidates winning. He echoed Franklin D. Roosevelt’s famous phrase by telling clients they had “nothing to fear but fear itself.”
“We managed through several wars, a bunch of market crashes, high inflation and skyrocketing interest rates, several attempted assassinations, three bad recessions, the Great Financial Recession, the global pandemic and the last disputed election,” he said. “We can certainly do well in an environment of strong GDP growth, low interest rates and inflation and strong employment and wage growth.”
Noah Damsky, the principal of Los Angeles-based Marina Wealth Advisors, said it’s reasonable for clients to feel anxious surrounding an election if they’re concerned about political unrest or violence. But he echoed that these worries are driven by emotion rather than history.
Though a moment like this may seem fraught, the result is “usually much less eventful” than the worst-case scenario people can ruminate on. Damsky felt the same was true now, noting that despite the events between the 2020 election and Biden’s inauguration, there was ultimately a smooth transfer of power.
“Politics is full of peacocking big mouths, and this election cycle is no different,” he said.
