Should You Change Your Investments Based on the Current Political Environment?
The 2020 election, coupled with fears of a perceived impending bear market, has shifted investors’ attention back into their portfolios.
What I’ve heard from my clients is what you’re hearing as well, which is that there must be a recession coming in 2020.
The recession and election do not deserve the fear they excite and they should not be the reason to rearrange your investment accounts. If your portfolio is well composed, it’s not the 2020 recession or election fears that you need to be worried about; it’s what you don’t see coming. And that’s how your portfolio should be built.
The real concern is that investors respond to the news cycle with a fight-or-flight attitude where the investor is the biggest threat to their own portfolio. They make erratic moves, like going to all cash or doubling down on defense stocks.
Yes, you want to make adjustments based on the current political environment, of course, but within reason. There’s no evidence suggesting dramatic changes in your portfolio prior to an election will guarantee a favorable outcome. In fact, the most appropriate action for those hoping for a port in the storm is actually to stay in the market.
After Bill Clinton’s election in 1992, I received a lot of calls from anxious clients. Everyone was concerned with the fallout of healthcare. A lot of people abandoned pharmaceutical stocks because of the perceived political risk. Unfortunately, they missed out on one of the great long-side trades of the decade. It’s painful to see a 40-year retirement plan upended by an irresponsible choice.
Research shows that people are affected more emotionally when they lose money, even a small amount, than when they gain money. So if a person is worried about a correction related to the election, they should review their investment accounts to ensure they’re properly prepared for a downturn rather than committed only to the growth element.
When the market is continually reaching new all-time highs, it’s easy for clients to think "Why isn’t my portfolio in lockstep with the numbers I’m seeing in the news?" but they should remember the other investments in their portfolio, especially the ones that are growing steadily, because they will be thankful for their resiliency in a downturn.
While there are stocks that are overvalued right now, there are also stocks that are undervalued. Through rigorous research, these stocks can be identified and effectively implemented to serve your portfolio in an uncertain market.
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Information presented reflects the personal opinions, viewpoints and analyses of the employees of Mirador Capital Partners, LP, an SEC-registered Investment Adviser. The views reflected in the commentary are subject to change at any time without notice. Nothing herein constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Mirador Capital Partners, LP manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Visit us at miradorcp.com for more information.