Hi,
The midterm elections are on Tuesday, November 3, and the noise is getting louder. Political media thrives on fear, and many investors are feeling uneasy about what the results could mean for their money. Our Certified Financial Planner (CFP) is getting this question from clients, and he wanted to share what he’s seeing.
If any of these sound like you, it’s worth a look:
- You’re thinking about moving to cash until after the election
- You’re retired, or a few years from retirement, and a headline-driven drop would keep you up at night
- You have cash on the sidelines and aren’t sure when, or whether, to put it to work
- Your allocation hasn’t been reviewed since rates and the market moved this year
Here’s what our CFP is seeing:
- Markets dislike uncertainty, not specific outcomes – volatility often rises in the months before an election because markets don’t like unpredictability. In midterm years since 1950, the S&P 500’s biggest drop during the year has averaged about 17.5%. Once the results are known, regardless of which party wins, that uncertainty tends to clear
- History favors staying invested – in the 12 months after every midterm election since 1950, the S&P 500 has been higher, 19 out of 19 times, with an average gain of about 15%. Investors who moved to cash before the vote often missed the recovery that followed
- Fundamentals matter more than elections – first reactions to an election are emotional, not structural, and new policies take time to show up in the market. Over several years, corporate earnings, interest rates, and productivity drive returns far more than who controls Congress. Even the Fed, which held rates at 3.75% to 4.00% on October 28, said politics played no role in its decision
- Uncertainty can be an opportunity – he’s only concerned about clients who aren’t prepared, need cash soon, or carry more risk than they realize. For everyone else, cash that’s already been set aside can be put to work when short-term emotions push prices down
The catch is that none of this is a prediction. Past results don’t guarantee the next 12 months, nobody knows how markets will react on Wednesday morning, and you can’t plan for what nobody’s tracking. That’s why we have an in-house, fiduciary Certified Financial Planner who can:
- Stress test your plan against a real correction and tell you plainly whether it holds up
- Review your current allocation and make sure it’s built for all market cycles, not just the last one
- Set up buckets of different risk around your cash flow needs, so short-term money isn’t exposed to short-term swings
- Build a plan for putting sidelined cash to work, so you’re not guessing based on headlines
Reply to this email by Monday and we’ll set up a free 15-minute call with our Certified Financial Planner to go over your situation and see where you stand. Bring your most recent investment statement, and we’ll talk through the next steps from there.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com
This email is simply for illustration purposes and is not intended to provide investment advice.