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The Best Thing to do With Your Stocks With Presidential Elections Just Around the Corner

As per the retirement fund TIAA, a moderate-risk portfolio with 60% stocks and 40% bonds fared across all presidential election years since 1928.

BY SUNAYNA KANJILAL

PUBLISHED MAY 19, 2024

Cover Image Source | Unsplash | Photo by Maxim Hopman

Major political shifts can also result in significant turbulence in the stock market, and results of elections can effectively sway shareholder sentiment. With a few influential people like Warren Buffet offloading their stakes in Apple, smaller shareholders are wondering if they should sell off stocks too before the presidential elections. But flipping through the pages of history will tell you that the effect of presidential elections on the stock market has been paltry. As per the retirement fund TIAA, a moderate-risk portfolio with 60% stocks and 40% bonds fared across all presidential election years since 1928. According to Justin Godur, finance advisor CEO and founder of Capital Max, the capital gains are currently not immutable and can fluctuate on legislative changes.

Image Source: US President Joe Biden gives a speech at Intel Ocotillo Campus | Photo by Rebecca Noble | Getty Images

"With a presidential election on the horizon, the uncertainty around tax policy is higher than usual. If the new administration decides to raise capital gains taxes, waiting to sell could mean paying a much higher tax rate on your gains," he said, via Go BankingRates. He described how selling stock now can save you taxes and how selling can further help you take control and decide where to reinvest in order to diversify the portfolio better.

Another thing to note is that speculation may affect the market sentiment as always and it tends to increase volatility. With election news all over TV screens and social media, one may disregard the decisions surrounding the stock market as noise, and while it is true to a certain extent, there are tips that can help an investor stand the test of time.

Godur says that the ultimate decision to sell stocks should be based on your own in-depth research and market analysis. “However, understanding and anticipating changes in tax laws is a crucial part of this decision-making process. By acting now, you can optimize your investment outcomes before potential tax hikes decrease your returns," he adds.

Investors observe stock market at an exchange hall in Beijing, China | Getty Images | Photo by VCG — Investors observe the stock market at an exchange hall in Beijing, China | Getty Images | Photo by VCG

Joe Camberato, CEO of National Business Capital, on the other hand, doesn't recommend selling stocks. He believes that having faith in a company's vision and sticking with them in the long run, is probably the best move.

However, the general sentiment of the investors is that the election can only affect the stock market to a certain extent. Hao Dang, an investment strategist at Consilio Wealth pointed out how the two presidential candidates have overseen good as well as bad markets. "Trump had good years in 2017 and 2019. He had bad years in 2018 and 2020. Biden had good years in 2021 and 2023. He had a bad year in 2022." Investors realize that the stock market is affected by several factors and only elections cannot carry a lot of weight.

“The stock market will chug along with ups and downs regardless of who wins," says Hao Dang who believes that this year the market will be a lot more volatile. So, all in all, if your stock has peaked, this is a good time to book profits from stock sales and reinvest them in diverse assets.