Brian Frederick, CFP®, CIMA®
The news these days is hard to ignore. Especially with the impending election, we are inundated with noise. Unfortunately, each headline is more salacious than the next and becomes harder and harder to ignore. It’s difficult not to let our emotions get the best of us and do something that feels good: to react, especially with all the current volatility of the market. My best advice is to stay the course and follow the plan.
I try to remind my clients that these headlines are more often than not clickbait, they are designed to drive readers to their site. News today may be more about viewership and “slant” than actual reporting of the facts in an unbiased fashion. This can be very distracting and worrisome. I find that things are rarely as good or as bad as the media portrays. I like to take a step back and remember what we can control, and usually that’s separating our investments from the economy and our politics. We hear so much about “don’t invest in your politics,” but then we read the headlines and the politics sway us and influence how we invest. I try to remind clients that we can control how we spend money, the investment process, rebalancing, and, most importantly, having a good plan in place so we don’t make rash decisions that we come to regret later.
It is easy to get emotional around politics and it can bleed into our investments. I remember the night of the last election and the headlines centered on President Trump causing not just a recession, but a depression. That evening I received an email from a client asking, “how many years will it take for the market to recover?” Luckily, reality was not as dire as some well-known media mavens were predicting and I was able to email back the next morning, “about three hours.”
Don’t fret if your favorite candidate doesn’t get elected in November! The US economy and stock market have generally marched higher through Democratic and Republican administrations alike. No President is universally loved and while the person who takes the office is important, they are not the only thing that causes the market to react. While we are likely to see some market fluctuation before and after November 4, the market is resilient and, if history has shown us anything, a strong plan prepares you for the potential rough seas ahead.
With that said, there will be certain sectors of the market that will adjust based on a whole host of factors including foreign trade relations, tax policies, and medical/healthcare reforms. When I look back at the last 70 years since WWII, I am comforted by the fact that the economy has continued to grow, slowly but surely, through good times and bad. Whether it be politics, war, civil unrest and discord, inflation and interest rates, economic policies, etc., the United States economy has been remarkably resilient and consistent. Our economy will continue to be resilient and dynamic as long as businesses are out there not just trying to survive, but adapting to and striving to thrive with the ongoing challenges. There is always opportunity and not every company or investor can always see that.
So, leading up to the election, my advice to clients is this: take a step back. The plans we have built for clients are tailored to the individual and their needs and don't have anything to do with politics. No news source or headline has the ability to grasp their situation. Good planning builds confidence and, combined with an investment plan, can help take advantage of the media-inspired panic of the less prepared. We saw the prevailing panic in tough times like March and April, and that showcased opportunities to rebalance or to sell high and buy low. If you’re panicked, you’re not thinking that way.
No matter what happens in November, focus on the things you can control, including how you react to headlines. And the next time you see someone like Jim Cramer on TV, remember, he’s there for a reason. Tried and true works and following the plan is key.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Any opinions are those of Brian Frederick, CFP®, CIMA®, and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance does not guarantee future results.