election

Election-Proof Your Portfolio

September 19th, 2016 by

electionWe’re nearing the end of another election year. If you haven’t already been exhausted by the wall-to-wall news coverage and attack ads on television, you only have about six more weeks to reach an appropriate level of disgust.

More importantly, the clock is running out on getting ahead of the curve to election-proof your portfolio. Hedging against all scenarios—a Democratic win, a Republic win, or an altogether different outcome—could save you a great deal of heartache when the next president is inaugurated.

Portfolio Protection

2016 seems to be one of those rare scenarios where, no matter which party gets elected, the impact on the average investment portfolio is expected to be negative.

Due to the unprecedented level of dislike for each of the two major party candidates, it seems that—perhaps more so than any other election in recent memory—the markets will be roiled no matter who wins.

The idea of the free-wheeling Donald Trump as president is giving Wall St headaches. The uncertainty over how an untested Trump would fare in the Oval Office does not bode well for the equities markets, which loath uncertainty. Although the business community generally favors the GOP in presidential elections, Trump is hardly your traditional Republican candidate.

At the same time, however, it doesn’t seem to matter that Hillary Clinton has positioned herself as the more business-friendly candidate (to the chagrin of many within her own party). The damaging deadlock in Congress would undoubtedly continue under a (second) Clinton administration. If you thought the legislature was obstructionist during the Obama years, expect even worse with another Clinton in the White House.

If Trump looks likely to win, the media could spark a market panic through “economic fearmongering,” says Jeff Gundlach, the prominent CEO of investment firm Doubleline Capital. We’ve already seen a fair amount of this, even as the race remains in a virtual tie.

hillaryThe implications for tax policy are also a major concern: Clinton is likely to raise taxes, while Trump has promised to cut them extensively for the higher tax brackets. These competing tax plans could certainly impact various sectors of the economy differently. Holding your money in cash or gold, or the investing equivalent of “staying on the sidelines,” is the only safe bet to hedge against either presidential candidate winning.

2016: The Year of Anything Is Possible

For the first time since 1992, when Ross Perot garnered nearly 20% of the popular vote, there is also the potential (however unlikely) scenario that the unpopularity of the two leading candidates will lead to strong support for a third-party candidate. There are at least three prominent candidates for president running on a third-party ticket: conservative Evan McMullin, running as an independent; Gary Johnson, running as a Libertarian; and Jill Stein, running for the Green Party.

It must be conceded that anything is possible this year. If no candidate can reach the 270-vote threshold in the Electoral College and the decision falls to the House of Representatives, the upheaval would be particularly beneficial to gold.

For more information of proofing your portfolio against this election, Forbes has several different ideas for each possible scenario.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.