Advisers address clients' market jitters as election anxiety runs high

Investment advisers are trying to soothe their clients about the potential impact of the upcoming vote on their portfolios.

In a normal year, a presidential election might cause anxiety. In 2020, the national vote is coming in the midst of a pandemic, unrest over racial injustice and a volatile financial market – all of which is making the atmosphere unusually tense and weighing on the minds of investors.

But advisers are reminding clients that markets usually go up no matter who wins.

“We’re definitely seeing heightened emotions,” Julia Carlson, founder and chief executive of Financial Freedom Wealth Management Group, said Thursday on a Zoom conference of investment advisers hosted by JConnelly, a financial communications firm. “We’re trying to disconnect emotions and investment decisions. Whatever way this election goes … [clients] are going to be OK.”

Stephanie Link, chief investment strategist and portfolio manager at Hightower, said following 18 of the last 19 elections, the market has grown over the next 10 years. In 15 of those instances, someone who invested $10,000 the day after the election would have doubled their money in the following decade.

Worries about the long-term implications of an election tend to “get overdone,” Link said.

She projected how the market might react in the short-term for different election scenarios. In a “blue wave,” where Democratic presidential candidate Joe Biden defeats President Donald Trump and Democrats take over the Senate and hold the House, there could be a 2% to 4% selloff over concerns about Biden’s plan to increase corporate and personal taxes on wealthy Americans.

If Biden wins and Congress remains divided between a Democratic House and a Republican Senate, the prospect of legislative gridlock might be welcomed by Wall Street.

“The market likes that the best because not much gets done,” Link said.

There are some moves that investors might want to consider, depending on who wins in November. Biden, for instance, supports raising capital gains taxes by setting the levy at ordinary income rates.

“If it is a blue wave, maybe it makes sense to take capital gains before year’s end,” Carlson said.

Even though Biden is leading in the polls, Trump proved in 2016 that he can defy deficits in most polls and prevail on election day. Biden has not locked down a win, said Brian Weiner, co-founder and managing partner of Audent Family Wealth Advisors.

“This should be a layup election for Biden, but he’s finding ways to make it difficult for himself,” Weiner said.