The upcoming elections are generating much buzz from the two primary parties. And we are nowhere near peak political activity when hundreds of millions of dollars are spent in an attempt to influence our votes.
Historically, the stock market has shown varied responses when it tries to anticipate the financial impact of the winners. However, it’s important to note that the broad market often performs similarly regardless of which party wins. Investors crave outcomes with higher degrees of certainty, and the securities markets are generally more stable when investors know the financial impact of the policies of the winning party.
As this Presidential election nears, you may wonder how the outcome could influence the stock market, the economy, and your investments, including your retirement assets.
Understanding the markets’ historical resilience and focusing on sector-specific rather than broad market fluctuations can help you make informed decisions during volatile times.
With the U.S. presidential election just a few months away, Beck Capital Management, an Austin wealth management firm, is preparing client portfolios for various potential outcomes that could impact investment performance. Sector investing is the foundation for these investment decisions.
Watch our podcast on how Presidential elections shape financial markets and investments.
Historical Impact of Elections on Markets
Contrary to popular belief, historical data suggests that elections have limited long-term effects on overall market performance. Markets tend to grow positively under every combination of governmental control, so you must recognize that while elections can introduce short-term volatility, macroeconomic factors that impact revenues and earnings will generally play a more important role in influencing future market performance.
Sector investing can help capitalize on these opportunities and be a risk management tool during volatile times.
Sector-Specific Impacts
While the overall market may not experience a significant impact by the future election results, individual sectors can experience notable changes:
- Healthcare Sector: Both parties recognize the need to address high pharmaceutical prices, but their approaches differ. Democrats may push for more government negotiation on drug prices, which would impact insurers and pharmaceutical companies differently than a Republican-led approach.
- Energy Sector: Energy policies can vary drastically between administrations. Democratic policies might create new regulations, increase oil prices, and increase subsidies for green energy producers. Conversely, Republican policies might boost the oil supply and ease regulations for companies that produce carbon-based products and power.
- Defense Sector: Defense spending is generally high under both parties but directed differently. Republicans might focus more on domestic defense buildup, while Democrats may continue supporting several current and potential international conflicts.
- Infrastructure Sector: Infrastructure spending is a bipartisan issue, with both parties recognizing its importance. Depending on the administration, the focus might differ slightly, but both parties will likely see continued investment in this sector.
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Additional Considerations
Other factors can impact the economy and market performance, such as:
- Trade and Immigration Policies: These areas can affect manufacturing, agriculture, and technology industries, where international relations and domestic policies influence supply chains, labor markets, and tariffs.
- Geopolitical Dynamics: Situations like the Russia/Ukraine conflict and tensions between China and Taiwan require a keen eye on defense and cybersecurity sectors, where geopolitical tensions can lead to increased government spending and prioritization.
- Government Spending: Areas such as energy, infrastructure, defense, public services, and entitlements might see varying levels of funding based on the party in power. Investments in these sectors should be aligned with anticipated policy directions.
- Tax Policies and Economic Considerations: Tax policy is another critical area influenced by elections. The fate of the Tax Cuts and Jobs Act, set to sunset in 2025, depends on the election outcome. A Democratic administration might let these provisions expire, while a Republican administration might renew them.
- US Budget Deficit: The current US budget deficit and debt levels are also pressing concerns. Higher interest rates mean higher costs for servicing $34 trillion of debt, which could significantly impact the government budget. This dire situation draws more attention to fiscal responsibility and the need to address the growing deficit.
Watch our podcast on how to balance your portfolio in 2024.
Why You Should Consider Hiring an Austin Wealth Management Firm That Uses Sector Investing Strategies
Every election year, the message remains clear: stay informed, stay strategic, stay flexible, and stay focused on sectors poised to respond positively to the polls’ outcomes. Beck Capital Management stands ready to assist investors through these volatile times with experienced advice and a sophisticated approach to various market conditions.
We’ve been serving clients with these investment disciplines since 1997. We focus on investment management, emphasizing original research and sophisticated portfolio management.
Our goal in creating Beck Capital Management was to provide customized services to affluent professionals, executives, business owners, retirees, and their families. Based on the number of wealth management firms that provided cookie-cutter solutions based on clients’ ages, we saw a significant need for a more sophisticated approach.
We strongly believe all investors are not the same. Investors deserve custom-tailored solutions based on their goals, timelines, and tolerance for risk.
We specialize in customizing investment portfolios designed and managed in-house to align with your current circumstances and future goals. This comprehensive approach from one provider is designed to enable us to offer lower management fees than other wealth management firms.
Our team brings over 100 years of combined experience in finance, planning, and investment.
When investing in the securities markets, you have two principal options: passive and active investment management. We strongly believe that passive, one-size-fits-all solutions don’t deliver the results our clients expect in volatile markets.
BCM also provides active investment management based on disciplined research and portfolio management principles. Sometimes, it’s better to invest more in stocks, and other times in conservative bonds and cash alternatives. We guide you through these decisions based on current and future market conditions.
What does this mean for you? We follow an investment philosophy and research process rooted in fundamental valuation models. Our “growth at a reasonable price” and “model growth” frameworks drive our thorough, repeatable, and data-driven research.
We conduct all research in-house using several institutional-grade databases and tools rarely found in independent financial advisory firms. Whether you prefer to be involved in the asset management process or delegate this responsibility, our team is ready to help you pursue your financial goals in various market conditions.
Are you ready to learn more about sector investing strategies in an election year? Contact us for an introductory conversation.
