Earlier this year, investors watched the coronavirus pandemic create volatility in the financial markets, ending the longest bull market in U.S. history. The first bear market since the financial crisis lasted about a month before investors moved forward in a very big way. Now, as equities hover near record heights, many investors are wondering what Election Day will mean for their portfolios, and whether they should alter their investments accordingly.
The short answer, markets and investing experts at TIAA say, is that they should stay the course.
“Timing the market is usually a bad idea, and the election shouldn’t be another reason for people to try to time it,” says John Canally, Chief Portfolio Strategist in TIAA’s Investment Management Group. “What to sell, when to sell, how much to sell. Where to put it, how long to stay out of the market, when to buy in, what to buy, how much to buy and in which accounts. Think about it: Getting one of those right is tough; getting them all right is nearly impossible.”
Change takes time
Canally understands why investors might worry about how the election will affect their portfolios. After all, the Republican and Democratic parties do differ substantially on a wide range of issues that affect corporations and individuals. But investors often overestimate the impact of a change in the White House and Congress and conflate campaign promises with enacted legislation, Canally says.
“Campaigns are easy. Legislating is hard, with many twists and turns. There are plenty of examples in history where a winning candidate promised something and didn’t deliver it.”
In fact, even if one party controls the White House, House and Senate, they will need at least 60 votes in the Senate to enact some legislation. There are some procedures that allow for approval with a simple majority, and the Vice President breaks a tie in the Senate.
Trends and tech expected to remain the same
Canally explains that the economic, social, market and technological trends that were in place before the election will most likely continue after November 3—even if there is a political change in Washington. “New trends may start, but change comes more gradually than we think it will,” he says.