Stay the Course, Advisers Tell Investors Acting on Political Anxiety

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/ Source: Reuters
By Reuters

The last two weeks of definitive primaries have not only been a game-changer for the 2016 U.S. Presidential race, but they also have been a bellwether for some investors.

Last week, Robert Wander, a financial adviser with his own firm in New York, got his first email from a client for this election cycle worrying about the impact on the stock market. The client wants to move all his assets into cash before votes are cast in November.

"I don't know his political leanings. For most clients, it's not something I get into, unless they are also friends of mine. There's no advantage in that," Wander said.

Wander's advice was equally agnostic to party affiliation: Stay the course.

Yes, it's boring and basic, but this is the guidance most advisers give, trying to talk their clients down from making changes to their portfolios based on emotions.

We "want our clients to stay with what can be predicted, and that is that the economy should improve by the end of the year," said Paul Christopher, head global market strategist for Wells Fargo Investment Institute.

Christopher's research predicts that the benchmark S&P 500 stock index will be up 9.6 percent over last year by the close of 2016. Still, he said that number could swing by 7 or 8 percentage points in either direction due to many factors, only one of which would be the election.

When clients ask Christopher what stocks they should buy if person X wins or Y wins, he declines to answer.

"It sounds like a dodge," he says, "but there are too many uncertainties for something that is not predictable yet."

Election Promises

Looking to history is not much of a balm here, because this election cycle is so different. Christopher points to his research on promises made on the campaign trail versus those kept in office. President Obama, for instance, only kept 32 percent of 506 promises made, such as the Affordable Care Act and ending the use of torture.

At Fidelity, one of the largest holders of retirement accounts, advisers caution clients to take a view at least five years out, even if they are planning to retire in a few months, which purposefully looks past any individual election cycle.

When Merrill Lynch is assessing the market, it focuses on company fundamentals rather than politics.

"The markets eventually price everything, and at the end of the day, it’s about earnings and how much investors are willing to pay for those earnings," said Mary Ann Bartels, head of portfolio strategy for Merrill Lynch.

For those inclined to worry no matter what, Betsy Billard, a private wealth advisor for Ameriprise Financial, said there are other more pertinent topics than the Presidential race to mull over.

"Typically speaking, presidents don’t move the market," Billard said. "The Fed controls monetary policy. A president doesn’t move interest rates. The Fed moves them."

Yet, one adviser has found a way to harness his client's anxiety into a more diversified portfolio.

Last week, Wes Shannon, a certified financial planner at SJK Financial Planning in Hurst, Texas, met with a client who wanted to make her portfolio more conservative because she was concerned about the election.

Because the woman and her husband were in their late 50s and had one of the most aggressive portfolios in his practice, he jumped at the opportunity to get them more aligned with where he thought they should be.

"I didn't go into her rationale. I don't even know if she's Democrat or Republican. I don't ask. I was like, all right great, let's dial it back," Shannon said.