What could the 2024 US presidential election mean for your investments?

The 2024 US presidential election is fast approaching, set to be held on 5 November. If you’re following along with the polls and surrounding news, you might be concerned about how this major political event could affect the performance of your investments. 

After all, the US holds significant influence over global markets, meaning that the outcome of the election might have a notable effect. 

Last quarter, we provided a general overview of how elections affect markets – but this year’s presidential election is particularly exciting and uncertain. Originally expected to be a rematch between Donald Trump and Joe Biden, the race shifted dramatically when Biden stepped aside due to concerns regarding his health. 

Now, Kamala Harris has stepped in as the Democratic nominee, making the race closer than expected. Indeed, while Trump looked more popular in the polls when matched against Biden, the New York Times reveals that Harris is now polling slightly ahead of Trump as of 20 September 2024. 

While you might be understandably curious about how the US election could affect your finances, it’s still vital to remember that making rash financial decisions based on short-term outcomes could ultimately harm your portfolio. 

With this in mind, continue reading to discover how the US presidential election might affect your investments, and why it’s essential to keep a cool head regardless of the outcome. 

While markets performed more strongly under Trump than Biden, a Republican win could result in uncertainty

If Donald Trump were to reclaim the presidency, there’s a chance he might continue the economic policies he defined during his first term. 

Federal tax cuts and deregulation were at the heart of Trump’s economic approach, which benefited higher earners and reduced corporate taxes. 

While certain sectors might respond favourably to tax reductions and lighter regulation, this could also introduce market volatility as investors react to policy changes. 

It’s also worth noting that Trump’s approach to public communication could contribute to further market uncertainty. Indeed, throughout his presidency, the Independent reveals that Trump made 30,573 false or misleading claims – almost 21 a day. 

Even recently, Trump was corrected by fact-checkers several times during his ABC debate against Harris. 

Despite these potential concerns, it’s worth acknowledging that markets performed somewhat strongly under Trump’s leadership. According to Schroders, overall market growth under Trump’s administration outpaced that of Biden’s presidency. 

All this to say: if Trump were to win in 2024, you might be tempted to shift your investments towards “safer” assets or cash out altogether. 

This said, it might be worth avoiding such hasty reactions. Knee-jerk decisions made in response to political events could undermine the long-term performance of your portfolio – whereas remaining invested and speaking to a financial planner could serve you better. 

A Harris win might mean short-term volatility, but markets could welcome the long-term stability

Kamala Harris’s entry into the race has undoubtedly reinvigorated the Democratic Party, as shown by the polling averages above. 

Her economic stance largely aligns with Biden’s, and she has expressed a desire to strengthen the middle classes through policies focused on improving workers’ rights, expanding access to healthcare, and increasing funding for education and affordable housing. 

Even though these policies do aim to promote long-term economic growth they may initially unsettle the markets. 

For instance, Harris’s potential push to increase corporate taxes could result in caution from wealthy investors. Historically, markets tend to experience volatility when faced with such tax increases, as they may lead to short-term dips in company profits. 

But remember: these reactions are usually temporary, and once the outcome of the election is clear, markets may begin to stabilise. Harris’s policies may create short-term discomfort for certain sectors, but they may provide long-term stability. 

As a result, the value of your portfolio may dip if either candidate wins, but this still shouldn’t push you to make rash investment decisions. 

It’s essential to keep calm and stay invested regardless of the outcome of the US election

No matter who wins the 2024 presidential election, it’s crucial to keep a cool head and stay focused on your long-term investment strategy. 

Elections are inherently unpredictable, and investors hate uncertainty, which in turn affects markets. However, successful investing often relies on your ability to maintain a long-term outlook, even during periods of downturn or uncertainty. 

If you attempt to time the market and cut your losses in the event of volatility, you might inadvertently hamper the overall growth of your portfolio.

For example: data from CNBC shows that if you had invested $10,000 in the S&P 500 at the beginning of 2003 and left it untouched until the end of 2022, it could have grown to $64,844. 

However, if you had attempted to time the market by selling off shares during downturns, and subsequently missed only 30 of the market’s best-performing days over this period, your investment may have only grown to $11,701. Even worse, missing the 60 best days could have reduced your investment to just $4,205. 

This shows just how important it is to stay the course, even when elections or other significant global events cause short-term volatility. 

Get in touch

While it is challenging to ignore volatility and focus on the long term, your financial planner can help you remain calm and collected in the face of market downturns.

Email info@athertonyork.co.uk or call us on 0208 882 2979 to find out how we can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.