I'm Stephanie Sammons, a CERTIFIED FINANCIAL PLANNER™ and the Founder of Sammons Wealth Management. I help successful women professionals who are in midlife plan for their ideal retirement. Learn more about planning, saving, and investing for your ideal retirement at Sammons Wealth Management.
how the presidential election affects retirement

Show Notes for this Episode:

Presidential election years are always interesting, but this year there is a lot at stake. Emotions are running high, and sadly, our country is very divided during this time. How can you prevent the Presidential election from creeping into your financial and investment decision-making?

It is quite common for investors to become fearful about what could change for them financially in an election year, and this year this has been magnified due to the global pandemic and recession. Common questions I hear are: What will happen to my taxes? Where is the economy headed next? With the high level of the national debt and the millions who are unemployed? How will the stock and bond markets be affected?

Predictions and polls are the norm during a presidential election year. But can they be relied upon? And should you make financial decisions based on what you think may happen? No. Never. This is a very risk thing to do that can backfire on you.

Polls are not reliable. We saw this in the 2016 presidential election and other past elections. My advice? Ignore the polls and predictions. What you can do is get out there and cast your vote!

Regardless of who wins the election, remember also that it’s much more difficult to implement policy from a plan, by design. Not only does it depend on who is in the White House, but it also depends on the makeup of Congress.

Rather than trying to predict what will happen, I want you to focus on taking charge of your own financial plan. It is senseless to make financial, investment, and retirement decisions based on what may or may not happen.

It’s also helpful to take a walk back through time and see how the market has performed in all of the past Presidential election years. The results that I share in this podcast episode may surprise you.

Regardless of who is elected President this year, I encourage you to passionately support your candidate and cast your vote, but keep your emotions check when it comes to your financial assets and retirement plan.

Don’t have a financial plan? Maybe it’s time to create a roadmap for your ideal retirement!

Tune in to this episode of the podcast to hear more about:

  • What’s at stake in the 2020 Presidential Election
  • How to rise above the fray and avoid getting caught up in the emotional chaos around you
  • A short history lesson on how the market has performed during all prior election years
  • Why making financial bets on who will win is dangerous
  • The one thing you can implement to protect your investment portfolio and minimize your downside
  • How you can remain in charge of your financial life and retirement plan

Resources mentioned in this episode:

Schwab Financial Research: Stock Market Performance in Past Presidential Election Years

Dimensional Fund Advisors Video: What History Tells Us About Elections and Markets:

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(00:05): Welcome back to the retirement money gal podcast. I am your host, Stephanie Sammons certified financial planner and investment manager. I am so glad to be back talking with you today about the presidential election and your retirement plan. There's a lot of uncertainty with the changing of the guard. And as of this recording, we are 80 some odd days away from the election in November, lots of dooms day headlines out there, lots of predictions, tensions are running high, and I'm sure like most people, you're probably a little bit worried about how all of this is going to impact your personal financial situation and your retirement plan. Presidential elections are challenging sometimes from an emotional perspective, politics are just sticky and that can be especially true as well within your own household and family tension because conversations can be strained. And we've got a very divided country right now.

(01:39): Even the social media mudslinging and name calling is at an all time high. And let's just be real. People are just not on their best behavior. These days. I even saw some financial advisors on Twitter getting heated about politics, and one of them resorted to some name calling, unfortunately, and I really hate to see that. I think it's perfectly okay to disagree, but not to disrespect. So the way I feel about it is unless you're prepared to encounter conflicts with people, with family members, with people on social media, who don't agree with you just don't do it. Don't engage. And if you do engage, just try to be respectful and listen and seek to understand if you can, before you seek to be understood. I know it's a lot easier said than done. And I'm saying this for myself as well as a reminder. There's no doubt though, that there is a lot at stake in this year's presidential election, not only from a fiscal perspective taxes, the stimulus that we've experienced from the pandemic, the soaring national debt, the deficit talk about the security of social security has even come up.

(03:30): We're in the midst of a recession and some people have been hit a lot harder than others, but also there are social issues at stake, like racism and discrimination toward minorities and women's rights and the rights of other minorities. And then there is the lingering coronavirus and the impact this virus has had on the health of our people and the aging population, the people, the more vulnerable people in nursing homes and trying to get our kids back to school safely, we're find help with daycare options or help our kids get through school at home. And the way we work completely changing sports and other enjoyable distractions, disappearing in vaccines being developed and treatments being developed. Even the integrity of our voting system has come into play with this election and the United States postal service for God's sake. So it's no wonder that most of us feel so passionate and so emotional and maybe even uptight about the outcome of this election. It is completely understandable that we would be feeling anxiety about what's to come because there is a lot at stake. However, when you let your passion and your emotion and your worry and anxiety bleed into your finances, your retirement plan, your nest egg, that's when you can really get yourself into trouble.

(05:48): So what I wanted to do today is share a few steps with you that you can take to keep your emotions in check for the rest of the year, or at least through this presidential election. All right, here we go. Number one, ignore the predictions. Do not take action on predictions and polls. Polls are not accurate, and this has been proven over and over and over. Nobody knows what's going to happen. Nobody knows who's going to win the presidential election and what will happen when that person wins, whoever it might be. It's a big mistake to make financial bets in particular with your retirement nest egg. When we don't know what the future holds, you can make big mistakes. That can be very costly to your future retirement years. If you recall the last election Trump versus Hillary Clinton, all the polls were pointing to Hillary Clinton winning the presidential election. She was a shoe in, and then it didn't happen. The election was just poof taken away from her.

(07:41): That's why we can't predict. And you can read all the headlines that you want to, and you can get embroiled in all the political conversations that you want to and get yourself worked up. But the only thing you can do is vote, go out and vote for what you believe in. And I love that this has really been the core message so far at the democratic national convention, the virtual convention. The other thing to think about here is whoever does get elected. Both candidates have a plan and they lay out their plan to us, but having a plan and implementing that plan, once you're in office, those are two totally different things. It depends on Congress. It depends on the economy. It depends on the business cycle. It depends on what unfolds things happen that are unexpected events like a global pandemic. It was unexpected.

(09:03): So just because someone lays out a plan that might scare you a little bit, the chances of it getting implemented, uh, it's tough to say it's much more difficult to implement a plan for a presidential candidate, unless there is just an entire sweep party sweep of the white house and Congress. So we'll see. But again, we don't know, we can't predict. So we have to ignore these predictions and these polls and focus on what matters and what matters is your vision for retirement and your personal financial and retirement plan and strategy. You can't control these external forces that are going on around you. So in my opinion, why get yourself worked up about it, just commit to voting. And if you want to go out there and talk about your beliefs and your values and try to help other people see the light as you see it, then have at it, feel free, just don't let it impact your financial decisions.

(10:31): Okay, I'll get off my soap box. Number two, gain some historical perspective. The Schwab center for financial research looked back at the performance of the S and P 500 index since 1928. So they went all the way back to 1928 and looked at the performance of the S and P 500 index during presidential election years. Okay. And they found in 17 of the past 23 presidential election years or 74% of the time, the market ended on a positive note with an average annual return of 7.1% that 74% of the time. Let me just read you a few other excerpts from this research of the six presidential election years that coincided with downmarkets most had obvious explanations in 1932, the country was in the midst of the great depression in 1940. The world was on the brink of war in the year 2000, the tech bubble burst.

(11:58): And in 2008 markets suffered fallout from the financial crisis and subsequent recession. So in other words, market performance, in those down years, those down presidential election years had little to do with the presidential election and much more to do with what was going on in the world and the economy. And of course we are in the midst of this COVID-19 pandemic. And I do expect there to be continuing volatility through the presidential election, but that really has nothing to do with the election. So I hope that makes sense. The other thing is who has, has performed better? Has the market historically performed better under Democrat or Republican presidents? And if you look at the numbers alone, the short answer is Democrats since 1929, the total return of the S and P 500 has averaged 57.4% under democratic presidential administrations versus just 16.6% under Republicans. So that's great.

(13:15): That's that's history and it's not set in stone. It doesn't mean that it could be the complete opposite this time. We just, I don't know, it's history, history rhymes, but it can't predict the future accurately. Another interesting piece of data is when the S and P 500 has risen in the three months before an election, the incumbent party generally has gone on to win the white house. When the S and P 500 has fallen in the three months before an election, the incumbent party has generally lost since 1928. This trend has been broken just three times. So an 87% success rate, and it hasn't missed meaning it's been accurate since 1980, fascinating, but it's no guarantee. So yeah, the author of this research study says, what can we learn from all of this while some clear patterns between market performance and presidential elections have emerged past performance is no guarantee of future results.

(14:39): Bingo. Thus, the best option is to stick with a broadly diversified portfolio that can help you achieve your own specific financial goals, regardless of who prevails in November, gain some historical perspective. That is number two, number three, take charge of your personal retirement plan. You are in charge and accountable for your own retirement outcome. And you've got to focus on your plan and your strategy and sticking to that, regardless of what happens with the presidential election, the data shows that longterm returns of Margaret's does not depend on which party controls the white house as was illustrated in the research study. I just read from your behavior, staying, well-diversified staying invested, saving more. That's what really determines your retirement plan success. So you shouldn't be making beds. You shouldn't be moving money around or jumping in and out of funds or strategies, try to predict what's going to happen. Your best opportunity to capture global market performance is diversification spreading out your risk so that you're positioned for everything.

(16:31): And you're not just

(16:31): Is making concentrated bets that way. If one or two areas of your portfolio don't work well in the short run, it's not going to absolutely crush you. And that's how diversification works. Anyway, some things work and some things don't work at asset classes and sectors. They move in and out of favor over time in a very unpredictable fashion. So it pays to spread your risk when it comes to investing for retirement over time, the markets have rewarded people, investors who have stayed invested regardless of who is in power. So take charge of your own retirement plan and stay focused on the longterm for the next five, 10, 15, 20, even 30 years an election year is just one year, 12 months. And that is very short term in the grand scheme of your life. And even the years that you will be retired, watch how the election unfolds, get involved, get out there and vote, but don't let these current events, these political headlines derail you all right, hope that helps as we get more and more into this heated presidential race.

(18:21): The show notes for this episode can be found at retirement money, gal.com forward slash 59, the number five nine. And in the show notes, I recap what I've talked about in the episode, in case you haven't visited the show notes pages before the website. And I linked to resources that I mentioned in each episode, so that you can click through and go read for yourself. So if I talk about a research study, for example, like I have in this episode, I will link to that in the show notes. If you have a financial or retirement related question, I want to hear about it. You can email me directly at Stephanie at retirement money, gal.com.

(19:16): I am going to be doing some Q and a episodes probably once a month going forward. And so I'd love to hear what's on your mind. You also may not be aware that I've launched a new community. The women retire smart community, and it's free to join. You can sign up at retirement money, gal.com forward slash community. And when you do so, you will receive new podcast episodes as soon as they come out. And you'll also get exclusive retirement tips and resources from me to help you retire smart, secure, and happy. So that's the women retire, smart community. It's free to join retirement money. gal.com forward slash community is where you can go and do that. Thanks so much for listening and I'll be back with you next week. This show is for informational and educational purposes only. Please do not consider any of the content as personalized financial investment tax or legal.

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