What Does The Election Mean to Retirement Investors?
Americans go to the polls next Tuesday, or by mail which I have done, and the stakes couldn’t be higher. The future of taxes, immigration, abortion, gun control and health care could be markedly changed with vehement, almost rabid support for all of these on both sides. Here’s what I think about each one of these….. not a chance! Let’s stick to the financial implications and how the election will affect your personal retirement master plan.
At the end of next Tuesday, the most likely outcome will be the Democrats taking control of the House, while the Republicans maintain a majority in the Senate. However, considering what we learned from the last election-it ain’t over until the fat lady sings!
Regardless of your party affiliation, don’t fret. This is a very common occurrence as the President’s party almost always loses ground during midterm elections as has been the case over the past 21 midterm elections. The party of the incumbent President has lost an average 30 seats in the House, and 4 in the Senate. Only twice have they gained seats in both houses.
This expected scenario would create what is called “gridlock”. We’ve all faced gridlock on the roads at rush hour. However, political gridlock is when legislation faces intense debate and has difficulties being passed due to different parties being in control in the legislature.
On the surface, a divided Congress sounds awful. However, it is very common believe it or not, stocks typically do quite well when there is gridlock in Washington. In fact, the best situation for investors is what we are likely to get – a Republican President and a split Congress. Under this scenario, the average annual returns for the S&P 500 are 12%!
So on Tuesday night, as you are following the election returns on TV or your phone, try not to let your blood pressure spike due to the seemingly endless ineptitude in Washington. It’s been around as long as the nation has been alive.
Here are my favorites:
In the election of 1800, Thomas Jefferson called John Adams a Hermaphrodite. In 1828, John Quincy Adams called then General, Andrew Jackson’s mother “a common prostitute, brought to this country by the British soldiers who married a mulatto man, with whom she had several children, of which number General Jackson is one!”, and in 1855, Kenneth Rayner called President Franklin Pierce the “Pimp of the White House.” Good stuff!
Regardless of who wins the most in this election, the investment climate has shifted. We have had two 10%+ corrections this year alone, which clearly shows that volatility is on the rise and the risks have increased. The easy money is behind us and a much more careful, diligent approach to investing is not only warranted but necessary for a successful retirement plan.
For a review of your retirement and investment plan, or to learn more about our disciplined investment and planning approach that manages risk and delivers returns, while being conscious of forward-looking tax-strategies and retirement income opportunities, contact us for a free, no obligation consultation today!
Cheers -Keith Springer
P.S. “Invest for need, not for greed!™”