Now that the political parties have chosen their candidates, I would like to offer my preliminary assessment of how investors might be affected by the November election. It is possible to look at history and party platforms to get an idea of the direction one party might take the country, but politics is messy business and there is no way to know exactly what the final product might look like. Experience teaches that, once elected, the legislation and policies that are actually produced by the controlling party, tend to drift more towards the center than the ones that were proposed on the campaign trail. In a pre-law class at the university a professor taught me that the definition of politics is “The art of compromise” so I find it useful to not get too worked up either way about what is being said at this point in the process.
Here are my preliminary thoughts for investors on the upcoming election. Keep in mind that every election is cast as “The most important election in history,” with each side acting like this is the one time the world will end if their team doesn’t win. In fact, I can’t remember an election when this wasn’t an overriding theme, yet both sides take their turns at winning and we are still here today. Elections are extremely important, don’t get me wrong, but our system wisely gave power to the people to change things every two years when needed.
A Donald Trump victory: If the president is re-elected the future for investors should be fairly predictable from a political standpoint. For all his unpredictability, Trump has actually been about the most predictable president I can remember. Like him or not, he does what he says he will do. In a second term I would expect a continued reduction in regulations, lower taxes and an accommodative Federal Reserve. These would be welcomed by businesses. I would also plan for better trading deals with friendly partners as well as a continued tough stance with China.
Bringing businesses back to America, specifically heavy manufacturing and pharmaceuticals would be a major emphasis. An infrastructure bill would also be a priority. These are all things I think the markets would welcome. Heavy stimulus spending will add to inflation, so I think equities and real estate would be preferred over the risk of holding certain types of bonds or cash type investments.
Before the virus hit, we had the best economy in our history. I would expect a victorious Trump to double down on the policies of the prior four years. Though the virus will continue to play a part, it would seem that the politics of it would diminish after the election. So I see a Trump victory as positive for the stock and real estate markets. Investors love consistency and re-electing a president removes many of the uncertainties a new administration might bring.
Next week I will give my preliminary investors’ take on a Biden victory.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
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