How Does An Election Impact My Retirement?

In this episode of Wealth Wise Women, Wes Cuprill dives into the impact elections can have on your retirement plans. Discover how past elections have affected the market, common misconceptions around political shifts, and key strategies for keeping your retirement on track regardless of who’s in office.

Key Points:

1. Historical Market Trends
   • How past elections influenced markets and what retirees can learn from these trends.
2. Avoiding Emotional Reactions
   • Why it's crucial not to let election outcomes drive hasty investment decisions.
3. Investment Strategy
   • Should you adjust your portfolio or stay the course post-election?
4. Policy Changes
   • Potential shifts in taxes, healthcare, and Social Security, and how to plan for them.

Takeaways:

• Stay calm and focus on long-term goals.
• Consult a financial advisor if you’re unsure about the election's impact on your retirement plan.

If you’re concerned about how political shifts affect your retirement, reach out to Wes and the team at Money and Clarity for personalized advice. Listen now to learn how to stay confident in your retirement plan!
________

Links mentioned in the episode: https://tfowealth.com/markets-and-elections-part-4-markets-have-rewarded-long-term-investors-regardless-of-who-is-president/

https://advisor.morganstanley.com/the-ernie-garcia-group/documents/field/e/er/ernie-garcia-group/S&P%20500%20in%20Presidential%20Election%20years.pdf

Coffee with Cuprill Episode: https://www.youtube.com/watch?v=vwa8FcG1_bE&t=341s

Like what you heard? Listen to more episodes here: https://podcasts.apple.com/us/podcast/wealth-wise-women-podcast/id1768763274

Follow us on Instagram: https://www.instagram.com/moneyandclarity

Enjoying Wealth Wise Women? Show your support by leaving a review and rating for the show.

Transcript

>> Wes Caprill: 0:03

We don't know what the effect of a presidential candidate is going to be on the long term growth of the market. Yes, fiscal and monetary policy do have effects on the economy, but long term we still are firm believers in the overall invisible hand of the market. Hello there and welcome to another episode of the Wealth Wise Women podcast. My name is Wes Caprill and today's episode I'm going to call a little bit of an audible. I was planning on discussing the second version of our suddenly single book, this one being A Widow's Guide to a Secure Retirement. However, I think I'm going push that back a week or two because I think now it's important to have a bit of a election post mortem conversation. Now, I'm not going to get into any of the politics behind the election. I'm not going to talk about who voted for whom. Though I will say it would be nice if at some point in the future we get back to kind of uniting after an election. Yes, it's one thing to have emotions to say your candidate didn't win or your candidate did win, but the us versus Them mentality is kind of getting a little tiring. I will admit it would be nice to see a little bit of unity again at some point in the future, but I digress. Instead, what I want to talk about today is market performance in the year of an election, as well as long term market performance during various administrations. It's understandable that people would have had a lot of uncertainty going into this election. They probably have uncertainty going into every election and it can be very easy to sit back and say, you know what, I want to wait and see how things play out. I don't necessarily know what's going to happen and if the worst should happen. I don't want to be exposed to any of that downside. However, like we always preach, trying to tie in the market and anticipate what's going to happen can be a very fatal decision to make, at least in terms of how it affects your long term financial security. So the first thing that I want to discuss is what has the market done in every administration going all the way back to 1926. Now, I'm not going to share my screen or anything here. Instead I just want to have an overall conversation about this. If you do go into the text area of this episode though, you will see a couple links to the graphs that I'm going to review and I think it's good if you go ahead and look through all of that. Additionally, I'm also going to share a link to a Coffee with Kapril series. This is a series that we do for our clients. Dan records various videos and in this one in particular that I'm going to share, he also discusses this graph that I will be discussing. So I think it's a good supplement to the conversation that I want to have now. And what we see from this chart, and forgive me if you see me looking off screen, it's me looking at the chart in question. But what the graph shows is the hypothetical growth of a dollar if you it in the market all the way back in January of 1926. And as we've seen, the market has gone up. Now obviously there's going to be ups and downs, but really what we're trying to show with this graph is the fact that it's a long term game and ultimately we don't know what the effect of a presidential candidate is going to be on the long term growth of the market. Yes, fiscal and monetary policy do have effects on the economy, but long term we still are firm believers in the overall invisible hand of the market going all the way back to Adam Smith. And so while short term there can be ups and downs in the market based on the market's reactions to various decisions made by the Fed or the President, ultimately long term returns still are positive. Now if we go all the way back to shortly after 1926, there was obviously a massive dip in the market. That was the Great Depression. And then for many years after that everything was sort of flat during the 1930s. But ever since then we've seen a very large gain over the years. Now there's always going to be recessions. Obviously, you know, the economy is cyclical and that's perfectly okay. We want it to be cyclical. That's how things are meant to go. You know, you have growth, you have a little bit of retraction and then you have growth again. And that's what we see here. So all the way up through Eisenhower we see a lot of good growth, Kennedy, et cetera. And then there's a good dip around the end of Nixon's administration. But then everything recovers. And then all of a sudden you see a very sharp dip midway through the Reagan years. That's when the market had a very sharp drop. I believe they called it Black Tuesday, if I'm not mistaken. Though don't quote me on that. I think I need to look that up. But I believe the market finished up for that year. The Clinton years were good then you See the dot com crash around 2000, the Bush years recovered, although it was kind of flat between the end of Clinton's administration all the way up through the peak of Bush. And then you had the Great Recession of 2008. The market was good under Obama, the market was good under Trump, and then for the returns over the last four years, the market has been good under Biden as well. So again, what we see here is that not necessarily it does one presidential candidate mean better things for the return of the market versus another presidential candidate from a different party. I then also want to talk about a graph here from Morgan Stanley. So that'll be the second link in the text box down below. And what this shows is the S&P 500's returns in US presidential election years. And I think this graph is very, very eye opening for a lot of people who might think that there's a lot of uncertainty election years and they might feel the need to sit on the sidelines and wait to see what happens. When we look at market returns in every election, 2016, all the way back to 1928, election years have been very, very good for the markets. In fact, there's only been a handful of down years. One of those 1932 Great Depression in 1940, that was the start of World War II. So there was a lot of global uncertainty. And then the other two years that pop up are 2000, you had the dot com crash and then 2008, obviously that was the Great Recession. But overall what we see here are very high returns during election years. in fact, a year that a Republican was elected, the average return has been 15.3% and the average year a Democrat was elected, 7.6. All election years those are, this is even including the down years, the average return has been 11.28% in election years. So I think this is very important to talk about because again, it goes back to the emotion a lot of people will think, you know what I want to get out of the market, I want to go into cash and I want to sit back and wait to see what happens. But when you look at past history now disclaimer is not to say that past history is going to play a prediction in terms of what's going to happen in the future. But I think it's good for learning in terms of what, what's going to happen. And if you sit back and sit on the sidelines and wait to see what happens, you could miss a massive uptick in the market. Now it is possible right now you could be saying, I don't want to necessarily re enter the market now because there's been a lot of enthusiasm. I don't want to use that word and have it be misconstrued in terms of enthusiasm that yay Trump want. What I'm saying is market enthusiasm. The last few days in the market have been very, very good. The last week I think has been up about 5% or almost 5% percent in the S&P 500. So it can be easy to sit and look at that and go, you know what, maybe I want to wait for the enthusiasm to wane and everything to stabilize before I get in because I've already missed the boat, if you will. What's dangerous about that strategy is what if enthusiasm doesn't wane? Or what if it takes a very, very long time for things to level out? You could still be missing the boat. So again, ultimately, it comes down to our usual strategy, and that is we don't try and time the market in the short term. We don't try and predict what's going to happen down the road. Instead, we play a long term game. So in terms of timing, I'm not going to sit here and try and predict what's going to happen today, tomorrow, next week, next year. Instead, what you need to do is follow the plan that you have in place and invest your assets according. If you are someone who is young, get in now and stay in for the long term. If the market dips, it's a great opportunity to take any cash you might have and buy stocks at a discount and lock in those lower prices and then see even greater growth in the long term. For someone who is in or nearing, retirement, it's an opportunity to fully diversify your portfolio, make sure that you're invested in some equities so you are achieving growth during times like this, but you're also in some fixed income portfolios so that you are protected from any possible downturns in the long term. Ultimately, it comes down to our message of this. You need to always make sure you have a plan in place. And that's why we work with all of our clients to create a holistic, long term, comprehensive financial plan. We take a look at every single aspect of our client's financial situation and we create a financial plan that is specific to them and their needs so that when we do have an election year, we say, okay, it doesn't matter who wins, we have a plan in place that accounts for all of the uncertainty in the future. So regardless if it's a Republican or a Democrat in office. We have a plan in place that says you're going to be okay because again, I probably repeat this in every episode and I'm going to continue repeating it. Our job is this to help you answer the question of will I be okay with an emphatic yes. So ultimately, yes, there is going to be a lot of uncertainty about what the next four years have in store for everybody. There is half the country who is very concerned about what the next four years has in store. There's also the other half that is optimistic about what's going to happen. Ultimately, I don't know how things are going to play out, but when it comes down to the stock market, what we have seen from the last hundred years or so is that it ultimately may not actually matter when it comes to the market who is in power. Yes, short term there's going to be some ups and downs and the market will react like it always does to the latest news of the day. But when it comes to long term growth, the invisible hand still plays a very primary role in how things behave. And long term, we have seen growth regardless of who is in power. So that being said, if you have any concerns, if you're nervous at all, if you're unsure about what's going to happen, give us a call or go to visit with mc.com and book a time on my calendar that works for you. Let's sit down and discuss this. I would love to understand what your concerns are because our primary job is to help assuage any of those concerns and to help you feel optimistic about the future. Again, it goes back to a previous episode where I talked about two of our past clients, one of whom lived very optimistic optimistically, and the other one had a lot of concerns. And while we were able to help alleviate some of those clients concerns, the one who lived sort of pessimistically if you will, she unfortunately passed away having not done many of the things on her bucket list. So it's our job to help you live with confidence and go, doesn't matter who's in office, I'm going to live the life that I've always wanted to live. We get so much satisfaction out of being able to help our clients live the lives that they've always wanted to live. So that being said, I hope you enjoyed this episode learned a few things Like I mentioned, all of the graphs that I discussed are in the links down below. So I encourage you to read through them and if you want to sit down and discuss how we might be able to help you build a long term financial strategy to, give you a good, bright, optimistic financial future. Give us a call at 513-563-7526 or go to visit with mc.com. thank you and take care.