By: Chip and Jamie Hunt

The recent swirl of events surrounding the 2024 presidential election seems to be fueling deeper divides, sharper rhetoric, and a greater sense of unease, leading many to consider what this may mean for their financial security. This apprehension, I suspect, causes many to watch and wonder, “Is there anything I should be doing differently to protect my finances?”

Under these circumstances, we offer our suggestions about what you may need to do concerning a few key financial matters that you may be facing. 

First, Remain Calm

Next, rational thinking tells us to stick to your financial game plan and keep on saving and investing according to plan. Credible financial plans are made to withstand market ups and downs. Do NOT attempt to time the markets in response to the hype of the news cycle. It rarely works.

Should I take money out of the market? 

The short answer: No.

Because we humans perceive elections as an agent of change, we intuitively believe we must change ‘something’ in anticipation of change. Not necessarily so.

Do NOT attempt to time the markets in response to the hype of the news cycle. It rarely works.

Research shows that those who remain invested during a presidential election year come out ahead. Based upon market data from Morningstar, TIAA Wealth Management noted that all but four election years since 1928 ended with positive stock returns.² Furthermore, it’s worth highlighting that all four of those instances were affected by events unrelated to the presidential election: the Great Depression, WWII, the Tech Bubble and the Great Recession of 2008.

Our guidance is to not let the tone and emotions of this election cycle interfere with your financial plan. If markets should experience a decline – as they frequently do each and every year – it’s likely to be only temporary and most probably will have nothing to do with the election.

Should I keep more money in cash? 

There are two primary situations when it is advisable to take a portion of your money out of the market: 1) to increase your cash reserves for upcoming major purchases and/or, 2) your impending retirement. This principle holds true whether it is an election year or not.

Upcoming Major Purchases: If you’re planning a significant expense within the next two years, such as a home down payment, car purchase, wedding, or college tuition, keeping this money in cash is smart.

Impending Retirement: If you’re nearing retirement, reducing exposure to market volatility is a good idea. Experts suggest having one to two years’ worth of cash on hand to avoid the need to sell investments during a downturn to meet your spending needs.

For either situation, keeping cash in high-yield savings accounts, money market accounts, or CDs is recommended. These savings products offer three key features you need for such situations. They provide:

1. quick and easy access to funds,
2. safety of principal, and
3. virtually guaranteed returns (though interest rates can fluctuate).

Although the Feds are hinting at rate cuts in September, higher-than-normal rates are expected to remain through the end of the year. You should expect to obtain rates in the range of 4% to 5% APR.

Should I wait to buy a home? 

Mathematically speaking, now is NOT a great time to buy a house.

Home prices just hit a record high in June. The low inventory of houses for sale in the Greenville, SC area, and the country in general, is pushing prices way up. It’s hard to fathom, but according to the National Association of Realtors, the national median existing-home price is now $426,900.³ That’s up from $266,300 in January 2020!

Higher prices coupled with higher mortgage interest rates means todays buyers get a whole lot less house for their money. Before the Fed started raising rates, a person with a monthly housing budget of $2,000 could have bought a home worth more than $400,000. Today, they could only buy a $295,000 home⁴… that is well below the median home price.

If you must buy a home now, consider cost-reduction strategies like mortgage buydowns and be on the lookout for better rates for re-financing opportunities in the future.

On the other hand, waiting to buy allows you to improve your credit score, save more for a down payment, and potentially secure a lower interest rate.

Should I wait to retire? 

There are many factors that go into the timing of your retirement, and a presidential election is not one of those factors… nor should it be. 

If you have done the proper planning and are on track financially, there’s no need to delay retirement due to the election.

If you are feeling particularly anxious about this election – if it would ease your mind – you should speak to your advisor about adjusting your portfolio to include a bit more cash than usual to cover any unforeseen surprises.  

Conclusion

If you haven’t met with a financial planner to formulate your retirement strategy, now might be a good time to ensure that you have done the proper planning. If you are insecure about your plan, it is a good idea to get a second opinion from a fee-only financial planner who will act in your best interest as a fiduciary. A financial planner can assess your situation, run the numbers, and provide recommended strategies that might help ease your insecurities. For many, this exercise provides an extra layer of security and comfort to help us get through anxious times like this.

This article is provided for informational purposes only. It is always best to counsel with your financial advisor or your tax professional to ensure that you make the best decision for your circumstances.

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1. Loudenback, Tanza. “Managing Your Finances in an Election Year Can Seem Daunting-but It Doesn’t Have to Be.” The Wall Street Journal, Dow Jones & Company, 22 July 2024, www.wsj.com/buyside/personal-finance/investing/how-u-s-presidential-election-years-affect-the-stock-market. ↩︎
2. Loudenback, Tanza. “Managing Your Finances in an Election Year Can Seem Daunting-but It Doesn’t Have to Be.” The Wall Street Journal, Dow Jones & Company, 22 July 2024, www.wsj.com/buyside/personal-finance/investing/how-u-s-presidential-election-years-affect-the-stock-market. ↩︎
3. Ostrowski, Jeff. “Existing-Home Sales Fall in June amid Record-High Prices.” Bankrate, 23 July 2024, www.bankrate.com/real-estate/existing-home-sales/. ↩︎
4. Yale, Aly J. “What the Fed’s Rate Moves Mean for Your Money.” The Wall Street Journal, Dow Jones & Company, 2 Aug. 2024, www.wsj.com/buyside/personal-finance/mortgage/fed-rate-decision-july-2024-savings-cds-mortgages. ↩︎