Will the Next President Sink the Economy? Probably Not.

With elections just around the corner, it's natural for people to feel uneasy about how the results might affect their financial future. Pundits on both sides of the aisle are quick to raise alarms about how the other side's candidate would hurt the economy. However, a look at the hard numbers shows that those concerns are almost always overblown, and that the American economy is almost always resilient, even in the face of political change or turmoil.

In this episode of Capital Conversations, CERTIFIED FINANCIAL PLANNER™ Professional Colin Day and Financial Advisor John Biedenstein discuss the findings from a recent report from the Hartford, "The Next President is Unlikely to Sink the Economy or the Stock Market," and offer advice for near-retirees on how to manage investments before and after an election cycle.

For recent investment news and our take on the current market, retirement planning, and investment, listen to our podcast Capital Conversations or view our recent blog posts.

Below is a transcript of our most recent podcast episode, "Will the Next President Sink the Economy? Probably Not."

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Colin Day: Welcome back, everyone, to another Capital Conversation. I'm Colin Day, CERTIFIED FINANCIAL PLANNER™ Professional. With me again, John Bienenstein.

John, how are you today?

John Biedenstein: I'm just happy to be here.

Colin Day: You’re happy to be here. Well that’s interesting.

John Biedenstein: It’s a beautiful day in St. Louis again. The last time I did this, it was a beautiful day in St. Louis.

Colin Day: We will have you on more often. That's what I think you're asking for.

We are always looking for podcast fodder and guests like yourself, who I have to drag into here at least once a month.

John Biedenstein: I’m glad I wore the company logo.

Colin Day: Yeah, actually, another podcast person that we had on, Ryan, he was also wearing his vest. So I'm the one that is not a company shill today.

In any case, for those of you that are joining us audio only, don't worry, you don't need to see what we're wearing today. Because we have a very important topic to talk about.

John, are you aware of something kinda big that's going to happen in the United States in about a week's time?

John Biedenstein: When I turn on the TV it reminds me that there's going to be an election.

Colin Day: Ah, yes.

John Biedenstein: When I turn on the radio, there's going to be an election. When I drive around, you don't see the signs as much anymore, the big signs. But you do see the yard signs.

Colin Day: Certainly yard signs, at least in our neighborhood.

If you've been a longtime listener of the podcast or watching us on YouTube – which if you aren't subscribed to us on YouTube, please do. You can find us @corectcap online.

When it comes to having a conversation about something related to the election, you might have been aware that we talked about this not too long ago. We had a podcast where we talked about election cycles, why they matter (they don't matter in regards to investment performance and things like that). What we wanted to focus on was maybe on a twist or variation on that, which is talking around the concerns of a particular candidate winning over another one or vice versa.

Because, depending on what your political views are – which we're definitely not going to get into today, John.

John Biedenstein: We are not.

Colin Day: I already know who you’re gonna vote for. (No I don’t.)

But when it comes to making a decision, everybody has fear of the other side and what they will do, what the rhetoric is now. And I think it's interesting because you found a piece that talks a little bit about that. Some of the fear that came with a certain candidate winning the presidential election and what the actual results were four or eight years later.

So what did you find out, John?

John Biedenstein: One of our investment partners, The Hartford, has issues a recent what they call "Client Conversations," and the title is: "The Next President is Unlikely to Sink the Economy or the Stock Market."

And they go through a list of the presidents since Ronald Reagan, all the way up to our current president, President Biden. You hear some of the terms that people are concerned about. For example, some of the concerns back before Barack Obama was elected was that – this was in 2008 – he's inexperienced, we need a stimulus bill to fix certain things, those types of things.

So those were happening before his eight-year term happened. And when his eight-year term happened, the gross domestic product increased by 1.7%. The S&P 500 went up about 15% over that time period.

It's always what you look ahead to, but if you look in the rear view mirror, that's where I think partners like Hartford really lay it out to say, “You can think about it, you can worry about it,” but historical trends have indicated that all these things happen, but the U.S. economy has a way of being resilient, and finding a way to grow even through some difficult times.

Colin Day: Absolutely. And, just taking a look with – cause like you said, this is going all the way back to 1980 in this case – we're talking about more recently, president Trump, running for reelection, of course.

With someone like him, the rhetoric before he was elected was that he had never held political office before. He doesn't speak or [act] like a president that would be pretty common in terms of speech and mannerisms. The trade war with China will damage the U S economy.

But by the end of his four year term, the gross domestic product growth was 1.4%. And the S$P 500 index, tracking big U S companies, was up 16%.

And then you've got president Biden. His critics were saying that too old, a career politician that's running for president, and maybe the feeling that he's more of a vice president than a presidential candidate.

Average U.S. gross domestic product growth 3.3% (as of the time of this particular document), and the rate of return on the S&P 500 was annualized at 13.1%.

So it is to say, the stock market and the economy seem to be fairly resilient regardless of who is in office. I think that's pretty fair to say.

John Biedenstein: That is fair to say.

And we're talking about a piece from Hartford today. I believe when we chatted about this a month or so ago, it was an American Funds piece that [we] talked about. It [was] really the same message. And I'm on Facebook, I'm on Twitter – I still like to call it Twitter than X because it's easier for me. But you see these posts all the time that say this or that, and this is going to happen or that's going to happen. This is what this party has done and that's what this party has done.

The reality is, it’s not all correct. I don't know who's creating the information, but you look at these types of things where they have accurate information being compiled and reported on.

And this is what we've seen. I hate to say it, but I'm an investor going back to the Ronald Reagan election and going forward. Candidly, we've seen bumps, we've seen things go down, but the American economy has resilience that we always seem to get back on our [feet].

Even through the tough times that we've had with the high inflation, again it's coming down right now. I think it's at 2.6% now. We have a way of fixing things.

Colin Day: And of course, this is a very narrow view in terms of the political decisions that voters will make at the beginning of November this year. What, of course, this doesn't answer are any of the other topics of conversation in regards to why you vote a particular party or not.

When it comes to the investment side of things, your financial advisors are likely telling you the same thing. We have a long term view here. These presidents only last four to eight years. There [are] reasons for that.

If you think about it from that perspective, if you are nearing retirement, let's say you're 60 years old, listening to this or watching this. If you're 60 years old, we anticipate you living in retirement for another 30ish years. I don’t know what cryogenics will be available to us at that time. You might be around for a lot longer than these presidential cycles. You might be surviving through multiple presidential cycles beyond just the next couple of years as you approach retirement.

If you're listening to this and you're in your 20s, well, hey, sorry, get used to this. This is what life is when you become an adult. You have to focus on the fact that these cycles happen, for all intents and purposes, every two years, because we're going through House reps all the time.

But the idea here is that there is always going to be rhetoric. There's always going to be critics that are going to say one thing. And at least from this particular perspective – again, there are many reasons why you're going to vote for a particular political candidate – this one might not be the reason that you're choosing it.

It's not the cake. It's maybe the cherry on top of the cake that has eight tiers and those flowers and stuff like that.

Is this a terrible metaphor John?

John Biedenstein: The reality is we don't think the next president, whoever it might be, is going to sink the economy. And as Colin mentioned, again, focusing on retirees, focusing on folks that are soon to retire, it's more important that you manage it for the future. Don't manage your money [so] that if something happens, it all goes away in 2025 or 2026. Historically, that doesn't happen. Again, you make adjustments to it, even if you're nearing retirement. You might not be withdrawing or using these funds for 5, 10, maybe 15 years.

So you want to be as aggressive as you can with the level of risk that you're comfortable with. And we can help to tailor your portfolios, whether within a qualified plan, or within an IRA, to tailor it to what you're comfortable with. So having an open dialogue to say, “Hey, I might have enough, or I think I have enough but I need to make sure I keep up with inflation. We can tailor the portfolio to make sure that you're successful in retirement.

Colin Day: Yeah. And maybe we'll close with this, that, when it comes to short term decisions, they generally don't work out in the long term. We still get calls from clients and I expect to get more in the week leading up to the election, and certainly the days after, depending on your political leanings. We will receive phone calls and people asking to do one thing or the other. “I'm either going all in,” or more commonly, “I'm going all out.” And it's because of whoever just won the election or who is perceived to be winning the election in the days coming up to it.

When it comes to those short term decisions, you might be saying, “Colin, I think the market's going to implode if this person is elected.” You might be right in the short term in terms of the market reacting to the fact that somebody got elected. But, over long periods of time – because that's what we worry about, not the short term – you're more likely to be wrong than right.

If you have questions for us, feel free to send us a note. Provide us a comment and we'll be happy to provide you with our two cents. Or we'll encourage you to schedule a call so we can have a conversation with you.

John Biedenstein: The main conversation here is don't worry about it. But the most important thing is to go out and vote.

Colin Day: Absolutely.

Thank you so much for your time today, John. I appreciate you joining us again.

John Biedenstein: Thank you.

Colin Day: And thank you all for joining us on another Capital Conversation.

Until next time, have a great day.

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing.

As always, please remember investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. Correct Capital Wealth Management is a registered investment advisor. Advisory services are only offered.

Capital Conversations | Correct Capital Wealth Management

Elections will come and go, but your financial strategy should remain focused on the long term. As we've seen, the economy tends to be resilient no matter who sits in the Oval Office. If today’s discussion raised any concerns for you, or if you want to ensure your portfolio is prepared for the future, reach out to Correct Capital today. We’d be happy to have a conversation and tailor a plan that aligns with your goals. You can schedule a meeting with a member of our advisor team, contact us online, or give us a call at 877-930-401(k). It only takes 15 minutes to understand if we’re a good fit.