After a nail bitting (and still somewhat contested) nearly week long saga, America has a new President Elect, Joe Biden. As election results poured in, analysts and bankers anxiously awaited the American press to make the all-important projection of a winner, knowing the outcome will have a serious impact on global markets for years to come.
Now that the contest has been decided. what do the next 4-8 years mean for how you should invest and save? Here are 5 rules for investing & saving under a Biden Presidency…
- Stay the Course– As tempting as it may be to tweak your investing and saving philosophy, it is important to remember that professionals (who get paid a lot of money to figure this stuff out) have spent months pouring over data and scenarios under a new presidency, and often these projected outcomes are already baked into the current prices of stocks. If you are slowly and steadily saving for retirement in index funds, chances are you doing just fine given how the market has rallied post-March when Covid started to take hold globally.
- Expect the Unexpected– Pundits may be quick to prognosticate what market impacting events will likely take hold under a new President (higher taxes on earners over $400k, more regulation, etc.), but what remains to be seen is how effective the new commander-in-chief will be in pushing such legislation through the House & Senate. Bear in mind that the balance of power in the U.S. Senate still remains to be seen as two highly contested close races in Georgia will go to a run-off election come January. Buckle up!
- The Pandemic Throws a Wrench in EVERYTHING– If the past 9 months have taught us anything, it’s that until an effective Covid-19 vaccine is widely distributed, we are very likely to remain in a scenario of rolling lockdowns, travel restrictions, and crippling impacts to very specific segments of the economy (travel, luxury goods, restaurants). Since no one can predict when the pandemic will end (or wane enough for life to return to normal), it’s hard to know which businesses will survive and which stocks will rally in due course. This makes it even more important to maintain a balanced portfolio to offset risk.
- Risk IS a Four-Letter Word– Now is a good time to sit down and take a fresh look at your portfolio to make sure your investments are risk-adjusted. Imagine if your $500k portfolio was entirely invested in say airline or hotel stocks. Being too highly concentrated in one sector is never a good idea, and the global pandemic highlights exactly why. Why do you think billionaire investors such as Jeff Bezos and Warren Buffett invest in an extremely diverse portfolio of assets? It’s because concentration risk is real and an investor can never predict once-in-a-lifetime catastrophic events that could wipe out a portfolio during a downturn. Regardless of who is the leader of the free world, offsetting risk is always a good strategy.
- Take advantage of your current advantage– With rolling lockdowns, restaurant curfews, and gym attendance waning, chances are your spending may have come down significantly during the pandemic. Professionals who used to spend money on dry cleaning, commuting, new suits & shoes, and lunches with colleagues may find they have a little (or a lot) more cash on hand. With historically low interest rates, parking these funds in a high yield savings account may not make sense beyond keeping a standard emergency fund to cover a few months of expenses. Now is the time to continue to invest in retirement funds, real estate, 529 education plans, and other assets whose value is likely to grow over time. Regardless of how the market performs under a new administration, consistently putting your capital to work so your money makes money is the durable strategy for creating long-term wealth.
Do you have any predictions on how a new U.S. Presidency will impact global markets?
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