CFP Board Consumer Advocate Explains What the Presidential Election Means for Your Finances
Republican and Democratic presidential hopefuls have dominated our television screens, radios and social media channels for months in preparation for the 2016 election, discussing their proposed policies on macroeconomic issues such as job growth, income distribution, tax reform and immigration. Diverse political agendas and polices can leave consumers anxious about the U.S.’s financial future under a new leader and how that will impact their investments. CFP Board Consumer Advocate Eleanor Blayney, CFP®, discusses how to properly prepare your finances for any election outcome.
“Theories and opinions about the relationship of presidential elections and investment market performance abound,” says Blayney. “The problem with political patterns, of course, is that no sooner are they established then the value of trading on them often disappears.”
In her latest contribution to LetsMakeaPlan.org, Blayney explains how to stay focused on the major drivers of the markets and carefully consider how the election may impact these variables:
- Consumer confidence: Markets do not like uncertainty. Given political factors, it may be worth doing some extra portfolio volatility-proofing. Consider dividend-paying stocks rather than aggressive growth, and modest increases to high quality bonds and cash.
- Business cycle: It’s hard to foresee any short-term impacts a new president’s agenda will have on the investment markets. Savvy investors should nevertheless pay attention to the candidates’ proposed tax policies and consider possible impacts in their personal wealth and portfolios.
- Interest rates: Investors should remain “independent” when it comes to interest rates and take their direction from the Federal Reserve when making adjustments in the quality, currency and duration of their portfolios.
- Unforeseen events: There will undoubtedly be sudden events in 2016, but these often have the effect of propelling a flight to the safety of U.S. securities. If anything, the regularity and stability of our electoral process testifies to our leadership as a global economic power and bolsters confidence in our financial markets.
“Your own agenda – rather than those of political candidates – should be the most important determinant in managing your portfolio,” says Blayney. “Consult a CFP® professional who can help you stay diversified and maintain a sufficient liquidity to meet your financial needs.”
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The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. 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 awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. CFP Board currently authorizes nearly 74,000 individuals to use these marks in the U.S.
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