Women's Money Wisdom

Episode 244: How to React to Any Election Outcomes as an Investor

• Melissa Joy, CFP® • Season 4 • Episode 244

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In this episode of the Women's Money Wisdom Podcast, Melissa Joy, CFP®, CDFA®, dives into the importance of maintaining the right mindset on election day and how political outcomes can affect investment decisions. Drawing from her experiences with clients during past elections, Melissa discusses how political shifts often trigger anxiety and the impulse to react quickly—yet emphasizes the crucial value of focusing on a long-term perspective in investing. 

Melissa highlights how conventional wisdom about political impacts on markets can often be misleading, noting surprising areas of growth in sectors like alternative energy, despite changing administrations. She also provides actionable strategies to help listeners manage stress, stay focused on what they can control, and adopt a "glass half full" approach to economic growth, especially with the upcoming election on the horizon. 

Listen and Learn: 

  • How to set a stable, positive mindset on election day. 
  • The ways political changes influence investor emotions and decisions. 
  • Why maintaining a long-term investment focus is key, regardless of short-term political shifts. 
  • The unpredictable nature of market reactions to elections and why conventional wisdom often falls short. 
  • The benefits of staying invested across administrations for long-term financial success. 
  • Practical strategies for managing stress and staying resilient through uncertain times. 

 

Join Melissa for an empowering discussion on how a well-thought-out investment process, combined with a positive outlook, can help you navigate economic challenges with confidence. 

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://pearlplan.com/

Melissa Joy :

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show.

Melissa Joy :

Hello loyal listeners, I am reaching out to you today on election day. It's November 5th, 2024. And if you're listening to this episode after this date, I think that our content and conversation is still super applicable. But I wanted you to know that this is my little podcast note for you as you enter and go through and pass the presidential election for 2024. I just thought it was so important to set your mindset correctly for this date and, even though I'm recording it in advance of the outcomes of the election, I think there's a lot of super applicable reminders that I wanted to have with you front of mind as we approach this kind of landmark in our 2024 calendars. So thanks for listening, and I have my friend Brian Portnoy to highlight when he says that politics and elections are the Lord Voldemort of topics when it comes to economic and investment advice, and certainly I don't disagree I think this is a topic that we, as financial planners, I have to be prepared to discuss. It's not necessarily my favorite topic, but it's been one that we've really focused on this year because even when our clients, like you, are not asking and bringing it up, I know you're being influenced by kind of external forces, whether they're conversations with your friends and family or they're, you know, kind of media consumption. I know there's a lot of information out there, and so I wanted to start this episode with a story.

Melissa Joy :

With each of the last two presidential elections, both in 2016, when former President Trump won the election, as well as in 2020, when President Biden won the election I got phone calls from clients the next day. I don't know if you recall, but when former President Trump was elected, markets really went wild overnight. They seemed very disappointed. They opened the next day lower, but not by nearly as much, but I got a phone call that day from a client who said, melissa, like I don't care what you tell me. I know you're going to tell me this isn't a good idea, but I want you to sell everything today. And you know we did go through the conversation, like you need to understand in your case that there's some tax consequences if you were to sell everything because they own taxable accounts, and certainly this is not what we recommend on any given day, regardless of what the news is. In the 2020 election, too, we had clients that were disappointed that President Biden was elected, and had the same thing to say I think the economy is going to be really bad. I don't feel comfortable with my investments. I want to make changes For me.

Melissa Joy :

As a financial advisor, I know that markets are not looking to the outcomes of elections as an indicator of what should be going on in the economy. It's more about what's happening privately with companies, and you know we're going to plan to go to work tomorrow, regardless of the outcomes or even if we don't know what happened in the election. I like to say that an investor's time horizon is much longer than the cycle of Congress or presidents. It's not a two or four year time frame that you're investing for, whether you're retired or planning to retire someday, and so you have a much longer time frame than you tend to focus on when you are riled up because of information about elections, and certainly I wouldn't say that elections don't matter. I'm just saying that, in terms of economics and investments, the world is a much more complex machine and considerations have already been factored in about both outcomes, whether Vice President Harris or former President Trump are elected.

Melissa Joy :

So, getting back to my story, I, as an investment professional, look at one of the important Am I doing a good job for my clients to be your batting average of staying invested, sticking with your investment process? And it was really personally disappointing to me when I had clients that wanted to make changes In that first 2016 situation. Of course, if I'm being instructed by a client to make a trade, that's what I do, but I was really encouraged that I spoke with the same clients a few days later and they decided to go back into their investment portfolio, stick with their process, with a very minor disruption, which was good news, because both when you look at it just about three months after both President Trump as well as President Biden being elected you know we have data sets for both and you could consider Biden to be a proxy for President Harris you would see that in both cases, with both of them being elected, you had a positive outcome a couple months later, and so during the Trump presidency, markets were 6% higher after two months from the day after election, through inauguration day, and for President Biden, the markets were 14% higher, both positive. If you were to look at a chart and I will reference the great webinar that we did recently, which I will link to our YouTube, for that goes over what you need to know going into the election Looking back, you really needed to not sit out either side of the aisle in terms of their presidencies.

Melissa Joy :

To be an investor during a Democrat administration or Republican administration, depending on your preferences, you would have a lot less money than if you stayed invested across administrations, and there's also a lot of conventional wisdom that can really be misleading when it comes to results, for example, on the campaign trail. President Trump isn't necessarily the biggest advocate when it comes to alternative energy solar, different sources beyond gas, coal and oil, but it was a really good time to be an investor in alternative energy during his administration, an investor in alternative energy during his administration. Conversely, it's been better to be an investor in the energy sector during the Biden administration, and many would perceive the Biden administration to be more of a threat to the energy sector in general or the you know kind of old economy version of energy, so conventional wisdom and you know kind of like, hey, I've got an idea of how to have an edge of the market on the market doesn't tend to play out the way that you might expect, and it's just more complicated than that when it comes to outcomes and results. So I think that's something that it's really important to remember going in. I also want you to remember and we will continue to have the drumbeat of this mantra always but it's a fool's errand in investing to make predictions. So saying oh, one party or another is going to be elected and thus this is what's going to happen with the economy or the investing world is just not something that tends to happen. For example, the current administration would be perceived to be a regime that brings more taxes, but we didn't have a tax overhaul over the last four years, and one of the reasons for that is it requires more cooperation than just the wave of a magic wand or the signature of an executive order from the president. So there aren't kind of baked in. These policies will be enacted on day one of any administration, which again makes it much more difficult to predict outcomes.

Melissa Joy :

So I want you to go into today and A give yourself consideration for the mindset that you have when it comes to the economy and your investments. You know, if we were to look at a chart and I will show you this if you watch back our YouTube for our kind of preparing for the election webinar, you can see the flip from people who prefer one party versus another when it comes to how they perceive the economy when the opposing party's president comes into office. So you know, on the day that there's an inauguration or the day after an election, suddenly everything's flipped and the country isn't going in the right direction. And I'm not saying that one party is right or another, but it's very unlikely that things change that quickly in terms of actual numbers, whether it comes to growth, unemployment, etc. And so I encourage you, when it comes to investing, to analyze whether your perceptions about broader kind of governmental and political implications are factoring in and going over into your decisions about how you invest, just like I have the investors who wanted to make a change after 2016 and 2020, I know I've talked to some clients who really feel like they want to reduce their exposure to the US, depending on which president is elected, and I've talked to other clients who are very excited about the outcome of the election, thinking that their preferred candidate will win and thus it will be off to the races in terms of the economy and markets, and I just don't think things tend to work that way.

Melissa Joy :

And what I do know, though, is that an investment process that's kind of tried and true, that doesn't get influenced by short-term information even if it's as important as the direction of the country when it comes to who's in charge can really be important. That you don't get influenced by that and instead stick with a process that is enduring, that is built for long term, and focus more on what you can control. If you feel like you just can't do that based on current circumstances, I would encourage you to do a few things. One and this sounds so basic, but it's applicable. Whether you're talking to your therapist or talking to a financial planner Please make sure to breathe, take a deep breath, realize that you really need to make sure you're taking care of yourself and your well-being, especially if you have increased anxiety or stress based on either the outcome of the election or, certainly, if we don't have the results of the election just yet. At the end of this day, that uncertainty can be very wearing on someone's well-being. So try to manage that stress and speak with a professional if you need help. Certainly I would encourage you to speak with a financial professional. So if you work with a financial advisor or financial planner like me and you're left worrying, you know, hopefully you have access to content like this episode and communications, but also I would encourage one-on-one calls to discuss if you feel like you need some questions answered.

Melissa Joy :

Additionally, I always try to encourage people to think about the economy and markets in terms of glass being half full. We have gone through the last 15 years since the great financial crisis with one reason after another to be discouraged by the economy, and yet the results of both economic growth across administrations as well as investment results have been very good. And it's very difficult, or it's easy, to be pessimistic all the time, especially because oftentimes, when it comes to media and I'm I'm talking across the board your eyes staying on that media, whether it's TikTok, instagram, traditional media like cable news or traditional news, the newspaper, et cetera is to give you reasons to stay on, and often fear sells. Fear keeps your eyeballs on the page, and so I would ask you to kind of flip your perspective when it comes to investing in the economy and have a glass half full perspective, especially over longer periods of time, and you need those time periods where you may be discouraged but it turns out that things may go up.

Melissa Joy :

I also encourage you to think about your well-being if you're being kind of influenced by people that act like they have crystal balls, because I will tell you as an investment professional, it's just not the case. The top, top investment companies in the world have predictions all the time and they rarely come true when it comes to what the market or economy is going to do over time. So if you can navigate and manage while sticking to your process, if you can take it all in and then recognize that there's limitations in terms of what you can control but one of the things you can control is your investment process and financial plan and if you can care about the outcomes of elections but not let that influence the guidance that you have for your money, that is the way I would encourage you to go about this week.

Melissa Joy :

I think this is an evergreen episode that could talk about a variety of kind of big pieces of news that can be perceived to be very negative and in fact are negative, whether it's a natural disaster, war or future elections, and if you have questions, please let us know. But embrace this conversation where you keep that long-term in mind, you keep the glass half full and you manage your mindset for better days. Have a great day. Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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Melissa Joy, CFP

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