This Year's Election Proves Politics And Investing Don't Mix

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The battle for the White House is beginning to heat up, and no one feels the burn more than investors, who plan to move assets in the next six months. That’s according to a survey released on Thursday by financial services firm Edward Jones, who found that 90 per cent of investors are wary of what the next president will do to their nest eggs

“We didn’t expect 90 per cent to say they’re making changes,” Kate Warner, investment strategist at Edward Jones, told Your Money. “But economics drives investment decisions, so if you tie politics to this, it makes sense.” 

We asked Warner to elaborate on the survey and explain the fear that’s been driving investors’ decisions around this time. 

Tax concerns. Though Warner believes most investors “aren’t paying close attention” to what either candidate is saying, both Obama and Romney have warned that if the other guy is elected, voters will see higher taxes. “I think that’s registered (with voters) and reinforced this fear among higher income respondents,” says Warner. 

The recession. Both candidates play up the sluggish economy in their rhetoric, using imagery that’s sure to elicit fear and raise tempers—think unemployed factory workers, struggling families, and spoiled rich kids. “It’s making people feel worse,” says Warner, so “they want to be more conservative in their portfolio,” putting more of their assets in bonds than in stocks. “However bad you think the economy is, listening to the campaigns makes it worse,” Warner notes. 

Sweeping changes. The notion that whoever wins the election will push the country in a different direction is a prevalent one, says Warner, and it’s enough to scare investors into making some drastic changes.

Regardless of who gets elected, however, Warner urges investors to “think long-term” and “not mix politics with investing.” As we’ve noted before, making an investment decision that’s based on emotion, and particularly fear, could lead to loss and regret later on. It’s better to ground decisions in rational thought, or as personal finance guru Carl Richards would put it, to focus on the process and not the outcome

“Some people might respond by thinking they need to do something different, when in fact, that may be a mistake,” Warner says. “It’s important to remember that while the election will be in the history books, people’s portfolio’s need to last a lifetime.”

The long-term growth of the economy and your earnings will matter more over time.  

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