Weekly insights on the markets, economy, and financial planning
Special Update: The Election is Over, So What Comes Next? [VIDEO]
November 8, 2024
Mike Minter
After a historic campaign, Donald Trump has won the 2024 presidential election and Republicans have won control of the Senate. For half the country, this is a cause for celebration, while for the other half, this is a disappointing result that will require time to process. This reflects the divisions in our country on both social and economic matters that we hope will heal in time.
VIDEO COMMENTARY
Special Update: The Election is Over, So What Comes Next?
VIDEO SUMMARY
It’s clear that political outcomes can influence our daily lives and the direction of the country. However, regardless of which side of the aisle you’re on, history shows that the impact of politics on portfolios is often overstated. It’s important in the coming weeks to not overreact in either direction, but to instead keep a level head. Putting politics aside, what might this result mean for the economy and financial markets over the next four years?
The stock market has performed well across both parties
From a broad perspective, history shows that the stock market and economy have performed well under both parties over the past century. In the coming weeks, there will likely be both bullish and bearish predictions. Some may expect a significant rally similar to the 2016 election, while others will expect issues like tariffs to slow the global economy.
When it comes down to it, long-term investors should continue to walk the line by staying invested, diversified, and focused on fundamentals. On the one hand, stock market valuations are already well above average, making it more important to be thoughtful when building portfolios, ideally with the guidance of a trusted advisor.
On the other hand, investors should also be wary of overly pessimistic views on the market. It’s likely that predictions for market crashes have been made about every president in modern times. In recent years, it was certainly said about Obama in 2008, Trump in 2016, and Biden in 2020. Thus, it’s important to separate personal and political feelings from financial plans and investments.
This is not to say that good policies don’t matter, but instead that business cycles are driven by factors beyond politics. What’s more, policy changes tend to be incremental, even when a President’s party controls Congress. History also shows that it is very difficult to predict how any particular policy might affect the economy and markets since stock prices adjust to new policies and companies adapt quickly as well.
In addition, the uncertainty over these provisions during the election season made tax planning more complex. The expiration of the TCJA would create a potential “tax cliff” for many individuals and businesses. As a result, Roth IRA conversions, for instance, reportedly increased leading up to the election as individuals took advantage of current low tax rates.
It’s important to maintain perspective around tax policy since these issues can be politically charged. While taxes have a direct impact on households and companies, they do not always have a straightforward effect on the overall economy and stock market. This is because taxes are only one of the factors that influence growth and returns, and there are many deductions, credits, and strategies that can reduce the statutory tax rate.
The market has performed well across many tax regimes across history, including periods when the highest marginal rates were between 70% and 94% after World War II. Taxes today are low by historical standards. As the national debt grows, it’s prudent for investors to expect tax rates to eventually rise. Planning for this possibility is only growing in importance.
Tariffs and trade wars are back in focus
Looking at proposed policies, many investors worry that a second trade war could result from tariffs on major trading partners including China, the European Union, Mexico, and Canada. During his first term, President Trump increased duties on many goods including steel, aluminum, solar cells, washing machines, and more. On the campaign trail earlier this year, he proposed raising tariffs further, including up to 60% on China.
Unlike tax policy, which requires congressional approval, the president can impose tariffs through executive order. While many worry that this could harm the economy, analyzing tariffs can be complex. The Trump administration’s use of tariffs in 2018 and 2019 was often as a negotiating tactic, leading to a “Phase One” trade deal with China in early 2020. While the merits of the deal can be debated, the worst-case predictions for the economy and market never occurred.
In theory, tariffs can be inflationary since they increase the final costs of goods for consumers. Additionally, they run counter to long-held economic views that open trade creates mutual benefits for trading partners. However, they can also help to protect domestic industries from unfair trade practices, as well as secure intellectual property from theft and forced transfers.
The reality is that many tariffs imposed by the Trump administration were continued under President Biden. The current tariff proposals reflect the trends of de-globalization and protectionism that have emerged over the past decade. Once again, while tariffs and trade wars may impact certain industries and businesses, it’s important to not overreact with our portfolios.
Investors should focus on years and decades, not days and weeks
With the election now over, investors will shift their focus back to other economic considerations such as the Federal Reserve’s next rate decision, corporate earnings, and consumer spending. The fact that a significant source of uncertainty has been lifted could be enough to improve investor sentiment, as it has in past election seasons.
Ultimately, the business cycle is what has driven long run returns over the past century, and not two or four-year election cycles. These long-term business cycles are the result of broader factors such as industrialization, globalization, the information technology revolution, trends in artificial intelligence, and more. For investors with financial plans spanning years and decades, focusing on these longer-run trends is far more important than reacting to daily headlines.
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Special Update: The Election is Over, So What Comes Next? [VIDEO]
After a historic campaign, Donald Trump has won the 2024 presidential election and Republicans have won control of the Senate. For half the country, this is a cause for celebration, while for the other half, this is a disappointing result that will require time to process. This reflects the divisions in our country on both social and economic matters that we hope will heal in time.
VIDEO COMMENTARY
Special Update: The Election is Over, So What Comes Next?
VIDEO SUMMARY
It’s clear that political outcomes can influence our daily lives and the direction of the country. However, regardless of which side of the aisle you’re on, history shows that the impact of politics on portfolios is often overstated. It’s important in the coming weeks to not overreact in either direction, but to instead keep a level head. Putting politics aside, what might this result mean for the economy and financial markets over the next four years?
The stock market has performed well across both parties
From a broad perspective, history shows that the stock market and economy have performed well under both parties over the past century. In the coming weeks, there will likely be both bullish and bearish predictions. Some may expect a significant rally similar to the 2016 election, while others will expect issues like tariffs to slow the global economy.
When it comes down to it, long-term investors should continue to walk the line by staying invested, diversified, and focused on fundamentals. On the one hand, stock market valuations are already well above average, making it more important to be thoughtful when building portfolios, ideally with the guidance of a trusted advisor.
On the other hand, investors should also be wary of overly pessimistic views on the market. It’s likely that predictions for market crashes have been made about every president in modern times. In recent years, it was certainly said about Obama in 2008, Trump in 2016, and Biden in 2020. Thus, it’s important to separate personal and political feelings from financial plans and investments.
This is not to say that good policies don’t matter, but instead that business cycles are driven by factors beyond politics. What’s more, policy changes tend to be incremental, even when a President’s party controls Congress. History also shows that it is very difficult to predict how any particular policy might affect the economy and markets since stock prices adjust to new policies and companies adapt quickly as well.
The Tax Cuts and Jobs Act will likely be extended
Regarding taxes, a Republican Party victory makes it likely that much of the Tax Cuts and Jobs Act will be extended beyond its 2025 expiration. The TCJA overhauled the tax code for both individuals and businesses, including cutting corporate taxes to 21%, reducing many individual rates across tax brackets, lowering income taxes for many Americans, doubling the estate tax exemption, and more.
In addition, the uncertainty over these provisions during the election season made tax planning more complex. The expiration of the TCJA would create a potential “tax cliff” for many individuals and businesses. As a result, Roth IRA conversions, for instance, reportedly increased leading up to the election as individuals took advantage of current low tax rates.
It’s important to maintain perspective around tax policy since these issues can be politically charged. While taxes have a direct impact on households and companies, they do not always have a straightforward effect on the overall economy and stock market. This is because taxes are only one of the factors that influence growth and returns, and there are many deductions, credits, and strategies that can reduce the statutory tax rate.
The market has performed well across many tax regimes across history, including periods when the highest marginal rates were between 70% and 94% after World War II. Taxes today are low by historical standards. As the national debt grows, it’s prudent for investors to expect tax rates to eventually rise. Planning for this possibility is only growing in importance.
Tariffs and trade wars are back in focus
Looking at proposed policies, many investors worry that a second trade war could result from tariffs on major trading partners including China, the European Union, Mexico, and Canada. During his first term, President Trump increased duties on many goods including steel, aluminum, solar cells, washing machines, and more. On the campaign trail earlier this year, he proposed raising tariffs further, including up to 60% on China.
Unlike tax policy, which requires congressional approval, the president can impose tariffs through executive order. While many worry that this could harm the economy, analyzing tariffs can be complex. The Trump administration’s use of tariffs in 2018 and 2019 was often as a negotiating tactic, leading to a “Phase One” trade deal with China in early 2020. While the merits of the deal can be debated, the worst-case predictions for the economy and market never occurred.
In theory, tariffs can be inflationary since they increase the final costs of goods for consumers. Additionally, they run counter to long-held economic views that open trade creates mutual benefits for trading partners. However, they can also help to protect domestic industries from unfair trade practices, as well as secure intellectual property from theft and forced transfers.
The reality is that many tariffs imposed by the Trump administration were continued under President Biden. The current tariff proposals reflect the trends of de-globalization and protectionism that have emerged over the past decade. Once again, while tariffs and trade wars may impact certain industries and businesses, it’s important to not overreact with our portfolios.
Investors should focus on years and decades, not days and weeks
With the election now over, investors will shift their focus back to other economic considerations such as the Federal Reserve’s next rate decision, corporate earnings, and consumer spending. The fact that a significant source of uncertainty has been lifted could be enough to improve investor sentiment, as it has in past election seasons.
Ultimately, the business cycle is what has driven long run returns over the past century, and not two or four-year election cycles. These long-term business cycles are the result of broader factors such as industrialization, globalization, the information technology revolution, trends in artificial intelligence, and more. For investors with financial plans spanning years and decades, focusing on these longer-run trends is far more important than reacting to daily headlines.
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
Recent Posts
Special Update: What U.S.-China Trade Progress Means for Investors
Last Week on Wall Street: Fed Talk Calms Volatility [May. 12-2025]
Financial Synergies Completes 20-Year Internal Succession, Names Eight New Partners
Subscribe to Our Blog
Shareholder | Chief Investment Officer