The 2020 US presidential election has already had effects on your finances. It’s important to be prepared for any potential financial changes that could come with the presidential elections and how to prepare for them.
Are my investments in the stock market stable?
Generally in the year leading up to presidential elections, the market tends to show a more muted performance-that is the market underperforms slightly. For the most part, this doesn’t affect portfolios in a major way, but it is something to keep in mind.
2020 has been a rollercoaster year for the stock market, with unprecedented highs and lows. The coronavirus pandemic and subsequent economic fallout, along with the CARES act and government stimulus bill have created an unstable market bouncing up and down. After President Trump recently ended up in the hospital with COVID-19, the market took yet another tumble. With less than a month until election 2020, we can expect some more irregularities.
After elections, returns tend to be lower while bonds tend to be higher no matter what party takes control. Control of the senate, whether it happens from midterm elections or the presidential election, can also affect the market through tax regulations and spending bills.
What will happen to Medicare?
With so many seniors relying on Medicare benefits, it would be unwise for any presidential candidate to suggest cutting or reducing those benefits due to seniors being such a large percentage of American voters. President Trump has said he will avoid cutting Medicare. Vice President Biden’s plan expands Medicare and reduces costs. This plan also reduces the age with which you can sign up for benefits from 65 to 60.
Will my taxes go up?
Currently, the highest tax rate in America for individuals is 37%. Biden wishes to raise taxes on individuals who make over $400,000 a year, including individual income, capital gains, and payroll taxes. The majority of Americans make far less than $400,000 a year, so most will be unaffected by this change. This is also a marginal tax rate, so only dollars earned above the $400,000 would be taxed at a higher rate.
Per our article, 3 Big Ways Politics Affects Investments:
Typically, increases in tax rates can lead to poor stock performance. And, some stocks may be more specifically affected by tax matters. When investing for your retirement, it’s important to keep an eye on interest rates. Usually higher interest rates will hurt the stock market, as companies begin to compensate for less affordable credit. But, lower interest rates can be beneficial for your investments, as companies are able to receive cheaper credit.
Republicans usually run on a platform of lowering tax rates, while democrats suggest higher taxes on wealthier individuals to pay for social safety nets like Social Security, Medicaid, and more.
The election during the COVID-19 pandemic
The 2020 presidential election while in the midst of a pandemic is unprecedented. There is no clear plan from the federal government that is signaling a bipartisan effort to combat the spread of COVID-19. Because of this, the market is going to see ongoing turmoil and uncertainty.
2020 has proven to be one of the most contentious presidential election years in the history of the United States. The political parties are so divided on issues that there’s no telling what may happen in the month leading up to the election. With the news cycles focused on mail-in voting, voter fraud, and voter suppression, the outcome of the election may be contested, as well. This will also cause economic uncertainty as the US faces an electoral crisis.