Some of the greatest factors as to why a market declines is because the market isn’t sure of what is going to happen. When consumers, businesses, and the government all have little to no idea what will take place during a midterm election, people tend to hold back until that question is answered.
People do this by selling in the market, consumers do this by holding cash, and the government raises rates to have more money in their pocket for what is to come.
Historically post-midterm election
Generally, the market tends to improve once the question is answered. Right now the question is will the Democratic Party continue to have control of the government, or will the republican party take the majority?
Despite what your opinions are on the current administration, and administrations of the past, once the midterm question is answered, it typically bodes extremely well for the consumer with their money invested in the market. See the chart HERE that proves this.
Pandemonium or peace?
This year has been a tumultuous year when it comes to client-advisor relationships. It is unacceptable if an advisor cannot adequately explain to a client why they are seeing losses in their account.
From fears of inflation, immigration, the war in Ukraine, there are a number of reasons why the market is volatile. As discussed in the previous article, the market is a roller coaster, and you want to be the one enjoying the full ride, right?
When it comes to things “that have never happened before”, all that does is create more buying opportunities in the market. Buy low, sell high, etc. Whether the media tells you it is pandemonium, or it is peace, that should not affect your attitude.
Midterms will be able to answer some questions, which will then lead to further action that may or may not help your portfolio. At the end of the day, as long as there is no global thermonuclear war with trees on fire in your backyard, I’d say everything will be alright.
Make your voice heard
As long as you cast your vote, you really cannot be all that worried. You’ve done your part in our constitutional republic. What happens next is not always in our control.
Let your advisors talk you through the complications of the markets, and how administrations, presidents, and congress actually impact your portfolio. Sometimes a bad decision from your perspective can lead to opportunities in the market. For example, rising interest rates may be awful for someone who sells homes for a living, but at the same time, may be perfect for that same person, because they are extremely sensitive to risk in the market. Higher interest rates = higher return on government securities (treasuries). So, we could invest them into those securities. That is just one example.
This midterm election will prove to be consequential for all Americans, and we hope that whatever happens, the burden of seeing money vanish from your accounts, and the pain of seeing rising prices will lessen for everyone.
The power of speaking with your advisor
As overwhelming as the stock market, timing, capital losses, and more can become, always feel free to use an advisor you know to just ask questions. It is our passion to help people understand these topics.
When it comes to the life work of our clients and prospects, no decision is ever taken lightly. No account value is disregarded because all concerns and questions hold such a heavyweight in a time like this.
We hope you’ve learned a great deal from this article, and more importantly, reduced some stress from your life today.
Please feel free to use Drew Hodgson to begin asking your questions. There are no dumb questions and no wasted time if you choose to speak with him.
November 10, 2022
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