Elections inevitably involve uncertainty, and with candidates expressing differing visions for the direction the country should take, it’s natural to be concerned about how the outcome will affect many aspects of you and your family’s life, including your finances and investments.
As the 2024 presidential election campaign heats up, JPMorgan Wealth Management hosted a webcast on May 9 about the election’s potential impact on the economy. Moderator Shelby Anderson, executive director of wealth planning and advice at JPMorgan Wealth Management, discussed a variety of topics with Sean Snyder, executive director and global investment strategist at JPMorgan, ranging from historical market performance during election seasons to the potential tax and investment impacts of this year’s election campaign.
The speakers suggested that while elections can be stressful, it’s best to avoid overreacting when it comes to your financial strategy. But even if election season isn’t a reason to panic, it’s important to know how the results at the ballot box could affect your wallet and your portfolio. Here are some highlights from the webcast to help you understand the potential impact the 2024 elections could have on your finances:
There may be some misunderstanding about the financial market’s reaction to the presidential election. During the webcast, Snyder said, “The candidates not yet “If the president wins, the stock market will crash.” Despite the political fervor behind this idea, this scenario has not actually played out.
In fact, if you’ve ever heard that markets abhor uncertainty, it may not be surprising to you that stock prices tend to rise after an election as uncertainty fades. When a post-election downturn impacts the market, it is often a symptom of broader economic conditions rather than a specifically adverse market reaction to a newly elected president.
This doesn’t mean that the winner of the presidential election has no impact at all on stock market performance. Of course, presidential policies and decisions shape the economy at many levels. For stock investors, the impact of the election tends to be felt most at the sector level.
Financial stocks generally tend to do well before elections on the expectation that whoever takes office will try to spur economic growth with new policies. Health care tends to do better under a Democratic administration, while energy could do better under a Republican administration.
The 2024 race is unusual in that both presumptive candidates from both major parties have served as president before, providing a historical reference for what happened in the markets when they held the presidency.
Financial, industrial, and aerospace & defense stocks did well after Donald Trump won the 2016 election, while infrastructure stocks performed well after Joe Biden won in 2020. The post-election stock market rally was stronger in 2020, but it also coincided with positive vaccine news, proving once again that factors other than election results can affect the market.
Familiar faces and knowledge of what happened after the last two elections give us some clues as to what to expect this time, but there’s no guarantee that the same events will be repeated in 2024.
Regardless of who wins this year’s presidential election, many provisions of the Tax Cuts and Jobs Act of 2017 are set to expire in 2025. That means lawmakers must decide how to rewrite the tax code, balancing higher taxes with further increasing the national debt. When the 2017 tax law expires, most American households will see their taxes go up.
Of course, the future shape of the tax system will depend not only on the outcome of the presidential election, but also on the outcome of Congress, where party control of the House and Senate remains unclear and there is even a possibility that control of both chambers could change hands after the 2024 elections.
Republicans might support extending the tax cuts and proposing deep cuts in nondefense spending, while Democrats might support higher taxes on corporations and the wealthy. But the possibility of a divided government might force the two parties to compromise, perhaps raising taxes a little but with little deficit reduction.
Tariffs are another area where the major presidential candidates differ on their views and opinions. Trump supports imposing a 10% tariff on all goods entering the United States and a 60% tariff on all imports from China. Meanwhile, Biden plans to review the tariffs, but has recently announced his own tough stance against China, imposing significant tariffs on Chinese imports, including steel, semiconductors and electric vehicles. Tariffs can affect economic growth and benefit or harm certain sectors and companies.
The candidates also have differing views on climate and energy policy, with a second Trump administration seeking to increase energy production through drilling on federal lands and expanding pipelines, while Biden wants to reduce emissions and improve energy efficiency.
Increased production and targeted deregulation under the Trump administration could benefit some companies in the energy sector, but the gains for oil and gas stocks may not be as pronounced as some hope, as increased energy supplies also translate into lower prices. Meanwhile, if Biden remains in the White House, renewable energy assets could receive more support, but traditional oil and gas companies could come under pressure.
Although Trump and Biden have different priorities when it comes to their views on geopolitics and domestic security, defense spending is likely to remain strong under either candidate.
There is a lot at stake in the upcoming election, including its impact on your money, but ultimately, the outcome of the election has not affected market outcomes in the long term. While there may be increased volatility leading up to Election Day, there is no evidence that it will have a clear, long-term impact on the markets or the economy.
With that in mind, it’s important to be aware of the potential impact of the election so you can adjust your investments and financial strategies accordingly, but you also shouldn’t let the stress and excitement surrounding the political situation affect your long-term financial strategy.
“Don’t let your emotions get the better of you,” Anderson advised during the webcast. “Make a plan and review it often, even periodically, especially when life circumstances change. But don’t let your emotions drive your decision-making during this very stressful time before an election.”
