TEMPLE, Texas — The markets hate uncertainty, because depending on who wins the presidency and their laid-out agenda, some stock will do better than others under each administration, and right now, the market really doesn't know what will happen in November.
Now, add to that turmoil and war in the Middle East, and it's chaotic. After market dips like Aug. 5, it's always nice to have cash on hand. Surviving election year volatility is the topic of this Money Talks.
"Having a good cash reserve can help calm your nerves when the market is volatile," Certified Financial Planner Neil Vannoy told 6 News. "Not only does holding cash help you sleep at night knowing that you have money to cover unexpected expenses, but it also gives you some 'dry powder' to deploy in your portfolio if prices do go lower."
Don't be reactionary over this short stint leading up to the election. You've already got the cards you've been dealt, so play them in the short term.
"The time to review your risk tolerance is before a downturn, not during one," Vannoy said. "Consider how you've reacted to market volatility in the past and whether your reaction was different than what you thought it would be. If fear led you to sell, then you should consider holding a lower percentage of stocks to reduce your potential volatility so you can stick with your investment mix through future volatility."
If you are getting a lot of financially turbulent news, it could give you anxiety, so set those investments and maybe check out for a few months.
"Watching financial news – especially during an election year – can lead to unnecessary worry," said Vannoy. "Don't put your finances at risk by reacting to the latest headline, and take a break if you find yourself stressing about what could go wrong and focusing on 'doom and gloom', and if you want financial advice, it's always best to get personalized advice from a professional."
Perhaps most importantly, realize that over the long run, stocks tend to do well no matter who wins the election.
"It's easy to get caught up in the idea that whoever wins the presidency or which party controls Congress will have a direct effect on market performance," Vannoy told 6 News. "It's not that stocks are 'hoping' for one candidate over the other; what markets don't like is uncertainty, so that's why there can be volatility during election years. The S&P 500 has had an average annualized return of 10% per year over the past 30 years, notwithstanding a lot of political turmoil. So, invest for the long-run and don't make short-term decisions based on market-year volatility."
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