US President Joe Biden and former US President and Republican presidential candidate Donald Trump participate in the first presidential debate for the 2024 election at CNN Studios in Atlanta, Georgia on June 27, 2024.
Andrew Caballero Reynolds | AFP | Getty Images
Betterment polled 1,200 retail investors this spring across four demographic groups: Gen Z, millennials, Gen X and baby boomers.
However, financial experts do not recommend making investment decisions for political reasons, as markets tend to react to economic factors that politicians have no control over. They advise diversifying your portfolio and growing your savings instead of making investment decisions based on politics, even in a heated election year.
“The economy is going to keep running whether Democrats or Republicans are in power, so betting on one candidate to win over the other is not a good investment strategy,” said Cathy Curtis, a certified financial planner and founder of Curtis Financial Planning in Oakland, California.
Curtis, a member of the CNBC Council of Financial Advisors, said he’s seen clients express more confidence in the overall market this year, with the Nasdaq Composite, S&P 500 and Dow Jones Industrial Average continuing to set new records going into 2024.
“The market is very stable,” Curtis said. “People understand that. We’re not even getting emails or questions about being worried.” [from clients] “It’s about the market. In a really volatile year, people really pay attention to when things go down.”
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Still, customers at Curtis have expressed concern about the idea of Trump winning the election.
Curtis attributes the increased anxiety we’ve seen in recent years to growing polarization, but he still urges clients not to move their money in response to those emotions.
“Most of my clients are deathly scared of Trump becoming president again,” Curtis says, “which creates a lot of anxiety for them when it comes to investing, but most of my clients are educated people. If I show them the facts, they tend to calm down.”
Still, it’s becoming more common for investors to factor political opinions into their portfolios, according to Dan Egan, vice president of behavioral finance and investing at Betterment. Egan said he’s seeing investors making changes to their portfolios because they believe the winning candidate will have a bigger impact on the economy and stock market than they have in the past.
Despite this shift in investor behavior, the outcome of a presidential election has historically not had a significant impact on the stock market, he said.
Going back to 1928, the S&P 500 Came back The average turnover rate in election years is 7.5%, compared with 8% in non-election years, according to a March analysis by JPMorgan Private Bank.
“Stock prices go up on average whether you’re a Democrat, Republican or whoever,” Egan said. “The president in particular doesn’t have a huge impact on the economy, inflation and so on. That’s why we have checks and balances and separations like the Federal Reserve.”
Twenty-nine percent of investors surveyed by Betterment said they plan to increase their savings account holdings given the election’s potential impact on their portfolios.
Experts say having cash reserves may be wise given the current high interest rates on savings accounts and other low-risk investments, but they caution investors against staying too far out of the market and sitting on the sidelines.
“You’re getting such good interest rates on your money right now, so I would encourage people to have more cash reserves,” Curtis says. “If you don’t want to put it all in the market, that’s fine.”
