- 26% of Americans indicate they’ve become more cautious with their money as a result of events surrounding the 2016 presidential campaign. – Bankrate Money Pulse Survey, 2016
- 70.3% of advisors polled by Financial Advisor magazine said their clients are more worried than in past presidential election years about who will become the next U.S. president. – Financial Advisor magazine, 8/3/16
Uncertainty in the equity market tends to rise along with rising political uncertainty. Uncertainty over who the incoming president will be and what policies they may change or introduce can weigh on markets.
To have meaningful conversations with clients, while helping them keep the election in perspective and stay focused on their goals, it’s wise for you and your staff to review the message you want to communicate as you respond to questions and concerns.
What clients need to know
When talking to clients, it’s wise to avoid showing your own support for a candidate. Try to stay apolitical and let the client lead with their views on politics. It’s also prudent to be careful about what you post or “like” on Social Media that might support or deride a particular candidate or party. It’s always best to avoid debating clients on politics and risk alienating them.
A better approach is to stick to the facts of what’s happening in the economy and markets. The goal is to help clients avoid making decisions based on emotions rather than on logic and fundamentals.
Here are some ideas on messaging you may want to share with clients when appropriate:
- There are a lot of theories and speculation given to the influence of presidential elections on the stock market. None of these theories appear to provide actionable information that has the potential to benefit long-term investors. We believe investors would be better served by developing a sound investment strategy based on their needs and goals, rather than making changes based on political outcomes.
- While a presidential election undoubtedly affects Wall Street, it is just one of many factors determining a year’s market performance. What really drives performance in the markets is not the presidential election, but rather the overall macro economy.
- Remember, we are investing for the next 10, 20 or even 30 years. Just like we aren’t going to panic and make rash decisions due to short-term market volatility, we aren’t going to panic and make rash decisions based on who gets elected.
- It’s important to remember that markets have performed well under both of the nation’s main political parties. Indeed, the U.S. economy finds a way to grow and markets continue to perform despite all the changes in political parties, Congressional actions, tax laws and government regulations.
- When it comes to the performance of your portfolio, history shows that it doesn’t matter much which party was in the White House. Looking back to 1900, whether a Democrat or Republican occupies the White House, there has been no statistically significant impact on U.S. equity markets.
- Election years and rhetoric around market performance during election years should not dictate your investment decisions. Instead, it’s useful to focus on the basic fundamentals of sound investing, diversify your portfolio appropriately and invest for the long term.
- History has shown that markets have demonstrated relative resiliency regardless of election results or the current popularity of elected officials. Economic conditions will have a far greater impact on the elections than the other way around, as presidents only have a limited ability to affect the economy.
- Any volatility related to the presidential election alone will be short-lived and ultimately will not change the fundamentals in the economy. The careful diversification of your portfolio has been designed to cushion the effects of any short-term market volatility.
Communication is key
Regular communication with clients can help neutralize any anxieties caused by all the rhetoric around the presidential election. It’s important to remember that just because clients aren’t expressing their worries doesn’t mean they aren’t anxious and don’t have questions. You can include appropriate messages about market performance and presidential election years in your regular communications and even provide a timely seminar on market conditions for the remainder of the year.