With election cycles bringing shifts in policies, market sentiment, and investor confidence, the post-election period can be a dynamic time for those looking to adjust or fine-tune their investment portfolios. Whether a change in leadership has created a new economic focus, or existing leaders plan to reinforce their agenda, the post-election period can be an opportunity to assess market risks and growth potential. Here’s a guide on how to approach investments following an election and position your portfolio for potential benefits.
1. Stay Informed on Policy Shifts
New leadership often brings new policies impacting industries like healthcare, technology, energy, and defense. For instance, one administration might prioritize green energy and tech regulations, while another may focus on industrial growth and easing restrictions on fossil fuels. Staying informed about post-election policies can provide insights into which sectors might experience growth or face challenges.
Action Tip: Identify sectors likely to benefit from post-election policies.
2. Diversify to Hedge Against Policy Risks
Changes in policies can bring volatility, and it’s difficult to predict how specific policies will affect each industry or sector over the long term. Maintaining a well-diversified portfolio is one of the best ways to manage risk in any economic environment, especially during times of policy transition.
Action Tip: Evaluate your portfolio to ensure it’s well-diversified across asset classes, sectors, and geographic regions.
3. Focus on Fundamentals
Election cycles are typically filled with market volatility as investors react to news, polls, and the outcome itself. However, the fundamentals of successful investing, such as analyzing earnings growth, cash flow, and debt levels, remain constant. Amid short-term volatility, keeping a focus on the long-term fundamentals of companies can provide a clearer path to sustainable returns.
Action Tip: Identify companies with strong fundamentals that are likely to perform well regardless of political shifts. Look for businesses with steady cash flow, strong balance sheets, and resilient business models.
4. Keep an Eye on Interest Rates and Inflation
Post-election economic policy, along with potential Federal Reserve actions, can affect interest rates and inflation expectations. Higher spending on infrastructure and social programs could increase inflation, which might lead to higher interest rates. Meanwhile, cuts in taxes or deregulation in specific sectors can shift inflation and interest rate trajectories.
5. Be Patient and Avoid Reactionary Decisions
Market volatility often peaks around elections as investors react to anticipated or unexpected outcomes. While it may be tempting to overhaul your portfolio in response to market shifts, studies show that reactionary decisions often underperform in the long run. Taking a steady approach post-election can help mitigate risk and allow for better judgment based on clear data.
Action Tip: Avoid making drastic changes to your portfolio right away. Instead, consider gradual adjustments, stay calm, and continue to monitor market trends over the following months as post-election policies take shape and impacts become clearer.
6. Explore Global Investment Opportunities
Domestic policy changes can impact U.S.-based investments, but international markets offer diversification and growth potential. If the election has led to significant uncertainty domestically, global assets may provide an alternative way to spread risk and tap into growth opportunities that are less affected by U.S. policies.
7. Work with Financial Professionals
A post-election environment can present unique challenges and opportunities, and it may be beneficial to consult with a financial advisor. Whether for tax planning, asset allocation, or risk management, a professional can offer insights tailored to your financial goals.
Final Thoughts
While elections bring inevitable shifts and temporary uncertainty, the most successful investors tend to maintain a disciplined approach rooted in sound strategy and fundamentals. By keeping a long-term focus, avoiding knee-jerk reactions, and staying aware of policy trends, you can position your portfolio for potential success in any post-election environment.
Sharon L. Herman AAMS, ADPA is the CEO and financial advisor at Silver Key Wealth Management, and affiliated with LPL Financial. www.silverkeywealth.com
The opinions expressed in this material do not necessarily reflect the views of LPL Financial.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Silver Key Wealth Management, an independent investment advisor. Silver Key Wealth Management is separate entity from LPL financial.
Ms. Herman may only discuss and/or conduct transact securities business with residents of FL, MI, GA, NJ, VA, NC, SC, CA, TX, CO, NH, NY. www.finra.org www.sipc.org