Midterm elections spur uncertainty in markets

Voters make their way down the hall as early voting begins for the midterm elections at the Congressional Service Center in Columbus, Georgia, on Oct. 17, 2022.

Cheney Orr Reuters

Investment advisors say it’s not wise to try to time the market, but it does make sense to adjust your portfolio periodically. So with the midterm elections now a week away and the results still not in, does it make sense to make those changes now?

Probably not, say many financial advisors.

“Giving money based on political beliefs or what you think might happen in politics is an emotional decision, and emotional decisions when it comes to investing don’t work very well,” said financial planner Shaun Melby. , said the founder of Nashville, Tennessee-based Melby Wealth Management. .

He points to the Point Bridge America First ETF fund, which trades under the symbol MAGA and is marketed as a way to invest in companies that align with Republican beliefs. From its beginning on Sept. 7, 2017 through election night on Nov. 3, 2020, MAGA returned 6.85%, while, the S&P 500 ETF SPY returned 36.10% during the same period, according to Tradeweb.

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Electoral influence, the results of the policy are raised

There is also uncertainty about the outcome. Although the polls show that the Democrats may lose control of Congress, the polls are not the polls. And even if you predict the outcome of this vote, you can still end up undermining its impact.

“Like most market events, you can be 100% right on the timing or outcome, but wrong about how it affects the market,” said Kevin J. Brady, who CFP and New York managing director at Wealthspire Advisors said. “It’s not really important that a political party is so dominant that there are consequences.”

Predictive outcomes are also a motivating factor, which makes it difficult to invest based on what you think might happen.

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“Strategies are very difficult to implement, so you have a good amount of time to adjust to whatever those strategies may be,” said Taylor Sutherland, senior financial advisor at Halbert Hargrove., ranked no. 8 on CNBC’s 2022 FA 100 list.

Democrats are coming back ahead of the midterms, but it may be too late, former Sen.  Heitkamp said

He added, pointing to President Joe Biden’s infrastructure bill, which began as a $3 trillion plan but ended up at $1 trillion, with many changes in details.

Financial advisors say it’s best to adjust your portfolio based on your financial goals and not on the results of any event. But it is best to consider the economic perspective as a whole.

Sutherland says his company changed the portfolio in late 2021 to early 2022 as economic indicators changed and inflation began to heat up. “Those symptoms showed us that it was time to protect himself,” he said. “So we trade through stocks and funds for part of our client’s portfolio, and we maintain that position throughout the year.”

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The market has a ‘very different’ central theme.

Historically, stocks do well after midterm elections. In 17 of the 19 midterm elections held since 1946, stocks did better in the six months after the election than they did in the previous six months.

“If you look at the history of this, the market has different trading patterns in the mid-term election year, in which the first six and nine months are very rocky,” said Philip Orlando, who senior vice president and chief marketing strategist said. in Pittsburgh by Federated Hermes.

The party that controls the White House often loses seats. If we have a similar result this year and the government is divided, Orlando says that the stock market can start a 15% to 20% rally in the water. But there will be time to change after Nov. 8 will result in clear economic logic.

“That could be an exciting time to start picking up big growth stocks,” Orlando said.


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