Q&A: Should presidential campaign rhetoric impact your managed money?

The presidential election season will continue through November and the rhetoric is not expected to die down any time soon. Does this type of heated rhetoric between political parties have a negative impact on the economy?

Historically, the impact is minimal. We all have our political opinions, but the only way the economy can suffer is if people use those opinions to make rash decisions on how to invest their money. It is very important to separate those opinions from your plan for financial investment.

Does the stock market tend to suffer during presidential election seasons?

It seems like candidates on both sides often try to convince voters that is the case. Is it true?

In the overwhelming number of instances, the stock market goes up during a presidential election year. Over the past 100 years, which encompasses 25 presidential elections through 2020, the stock market has gone up at year’s end in 83% of those years. So statistically, historical data proves the rhetoric of the election season does not adversely impact the economy.

Many on both sides will tell you the economy hinges on which party takes control of the White House. Is this the case?

Certainly, with the role a presidential administration can play in tax policy and overall economic policy, the person who sits in the White House can indeed have an impact on the state of the economy, at least for short time. But success or failure is not tied to one party. We’ve had recessions under Democratic and Republican administrations, and we’ve had major economic booms under Democratic and Republican administrations. So there is no consistent correlation over time between which party is involved and how the economy and stock market performs. This is why people should not alter their investing plans simply based on which party is in charge.

What advice would you give to people in how they manage their finances while hearing incendiary talk?

It was difficult to avoid the heated rhetoric of the 2020 election cycle, and the same is proving true in 2024.

The best advice I can give is to shut out the noise, and stick with the plan you and perhaps your financial advisor have worked out for you. If an investment plan isn’t working over a period of years, then surely it may be time to change course. But if a plan is working and people are wondering if they should change it because of what they see or hear in the news and on political talk shows, there is no need to do that. Turn the noise off when it comes to your finances and trust in the plan you have built. That’s the best recipe for continued success.

So of factors that go into building and maintaining a financial investment plan, politics should not be one of them?

Correct. Personal politics should help you decide for whom you wish to vote. They can even help you decide which businesses you choose to support, or not support. But they should be divorced from your financial planning. Investment and retirement planning should be about how you want to manage your money, when you may want to retire and how much you think you need to live on when that happens. Those are all important factors, and you then build a plan to meet those needs. But which candidate or political party may or may not win an election should have little to do with it.

So, to sum up, people should never feel the need to panic about their finances based on what is said during the political campaigns?

There is never a need to panic about your finances or your plan. You have built a plan thoughtfully and carefully, based on your specific needs and desires. Follow that plan, don’t get distracted by the noise and, most important, trust in your own good judgment. There is no need to deviate from it based on outside factors that you cannot control.

Heath Grossman, CFP®, is a partner with Johnson Brunetti, a Connecticut-based retirement and investment firm