By Eric Reich
I was always told not to speak about religion, politics, or personal finances in social settings or at your place of employment. These topics tend to cause the most stress and aggravation among conversationalists, typically leading to confrontations. In this article, I am going to break two of those rules by discussing politics and your personal finances.
On countless occasions, one of the first topics our clients want to discuss in their meetings is the current political environment. The instantaneous media and 24-hour news cycle have caused a lot of investors to be overly worrisome and agitated at any given mention of policy or law suggestions. Some believe that each word a politician utters damages their hard-earned savings, leading to irrational financial decisions. We are more in tune than ever with policy and government; that’s not a good thing.
Your portfolios don’t care if a Republican or Democrat is in office. There, I said it. Instead of investing depending on who is in office, we encourage investors to look at history and trends.
Every four years, we have a new presidential election. Every two years, we have a shake-up in Congress. We have hundreds of years of history providing us with statistical data exhibiting how the stock market reacts during each year of a president’s term. Notice I didn’t state whether said president was a Democrat or Republican? Why? Because the market looks past who is president. The market is bigger than all of it. Yes, policy can manifest as short-term volatility, but untimely profits rule above all. We encourage investors to act accordingly.
Policy can certainly drive the stock market, but the Federal Reserve, having control of interest rates, has far more influence on the market than any political party. Case in point, the year 2022. It was one of the worst years for the traditional 60:40 stock-to-bond portfolio in history. The Fed raising interest rates to combat sky-high inflation had quite a bit to do with that.
Remember politicians can say and threaten a lot of things, but they need support to enact any laws. Our government was established with strict checks and balances to ensure not one person has total authority. This alone should help put investors at ease.
The market has historically trended higher. It has done so under Democratic leadership and will do so under Republican leadership. We expect that to continue. It is important to take personal bias and emotion out of your financial plan. We are not saying you need to agree with our elected officials. However, we are suggesting you ignore their rhetoric when it comes to your financial future.
You should build and invest your financial plan based on your goals and objectives, not a political basis. You should also rely on facts, not feelings. Look at history and trends to help guide your narrative. We help counsel our clients through volatility and uncertainty by doing this.
We recognize the frustration and angst that the media can create, making it even more important to seek advice and help when it comes to making financial decisions. Don’t let the media’s narrative dictate your future. Take control and make decisions with a clear head.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
