As we grow closer to the presidential election in 2024, Americans are starting to consider how political effects will move their investment portfolios, finds new research from the Nationwide Retirement Institute.
Regardless of their politics, 45% of investors in Nationwide’s Advisor Authority survey believe the results of the U.S. federal elections will have a greater impact on their retirement plans and portfolios than other market performance. Additionally, 32% of investors believe the economy will fall into a recession within 12 months if their least preferred political party gains control in office. Another 31% say they worry about their future finances if their ill-favored party wins.
Nationwide attributes the investor pessimism to over-zealous political campaign advertisements and marketing that can generate consumer fears.
“As we get closer to the 2024 election, we’re going to see more messaging and campaign ads that portray worst case scenarios, creating anxiety in investors that can lead to short-sighted, emotional decisions,” said Eric Henderson, president of Nationwide Annuity, in a statement.
“It’s important for investors to not get caught up in the ‘what ifs,’ and instead focus on what they can control. A proactive step would be having a conversation with their advisor or financial professional and establishing a long-term plan – or revisiting the plan they already have in place – to ensure it remains aligned with their goals regardless of which party takes control in Washington.”
Strong reactions from Dems and Republicans
Both blue and red voters shared strong sentiments over the political impacts of their finances, even if not all believed the political implications would be severe.
Two-thirds (68%) of Republican investors said the outcome of the election would have a direct, immediate, and lasting impact on the performance of the stock market, compared to 57% of Democratic investors.
Fifty-seven percent of investors who identify as Democrats said market performance would have a bigger impact on their retirement plans and portfolios than the results of the 2024 election, compared to 47% of Republicans.
As for other parties, Independent investors cared the least about the impact to their finances—40% said the results would have a larger impact than market performance.
Older investors more concerned
Investors inching closer to retirement were likelier to be more concerned for their investments, found Nationwide. Fifty percent of pre-retiree investors (those ages 55 to 65) said they were worried over an impending economic recession, compared to 41% overall. Pre-retirees and retirees were also more anxious about inflation than investors overall (66%, 66% vs. 61%).
In anticipation for next year’s election, 33% of pre-retiree investors are being more conservative in their investments, compared to 31% of overall investors.
Spending changes
Aside from potential political implications, investors are still worried over the long-term effects of Social Security insolvency, with 25% believing they will need to work longer to save money for retirement.
As a result of their fears, investors are changing their spending and investing habits. One third (33%) of investors are avoiding unnecessary expenses, including vacation, jewelry, and shopping sprees over the next 12 months.
Advisors stay the course
Similar to investors, retirement plan advisors believe inflation is the most immediate challenge to their clients’ portfolios (46%), and 38% believe the stock market will be volatile throughout the next 12 months as a result of the presidential election.
Yet, despite their own trepidations, over half (56%) of advisors believe staying the course and avoiding any changes to investment strategies is the best path forward.
Keeping this approach in mind, Nationwide says advisors are recommending and implementing their strategies accordingly. Ninety-six percent currently have a strategy in place to help their clients protect their assets against market risk, an increase from 92% in the last 12 months.
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