Recent survey data from TD reveals that younger investors are more likely to modify their investment portfolios ahead of the 2024 presidential election compared to their older counterparts. This comes at a time when the financial landscape has seen significant changes, including the Federal Reserve’s first interest rate cuts in four years.
According to TD’s Investor Pulse Survey, 21% of investors with investable assets exceeding $100,000 indicated plans to adjust their portfolios before the election, with an additional 24% planning changes before year-end. The generational divide is striking, with 71% of investors aged 18-44 planning election-related portfolio
adjustments, compared to just 48% of those aged 45-64.
Jim Beam, TD Wealth’s U.S. head of investment management, brokerage, planning, retirement, and strategy, advises against making dramatic portfolio changes based on election outcomes. He emphasizes that while election years typically bring increased market volatility due to policy uncertainty, historical data shows relatively consistent market performance regardless of political outcomes.
Market analysis since 1972 demonstrates an average gain of 1.5% in the three months preceding elections and 5% in the following quarter. Even more telling, dating back to 1860, portfolios with a 60-40 split between equities and fixed income have shown minimal performance variation between Republican and Democratic presidencies, yielding returns of 8.1% and 7.8% respectively.
The survey also highlighted interesting generational differences in wealth-building priorities, with 81% of younger investors focusing on generating generational wealth compared to 64% of older investors. Beam attributes this disparity to the unique economic challenges faced by Millennials and Gen Z, including substantial student loan debt, soaring housing costs, and significant credit card obligations.
These younger investors’ higher risk tolerance may be influenced by their longer investment horizons and greater comfort with
technology-enabled trading platforms. Their increased exposure to financial information through social media and online forums often leads to more frequent portfolio adjustments. In contrast, older investors typically prioritize capital preservation and stable income, having developed their investment strategies over decades of market experience.
Beam notes that younger investors’ behavior is particularly influenced by loss aversion and recovery bias, making them more reactive to news and speculation, especially during election cycles. However, he emphasizes that the key to long-term financial success lies in developing and maintaining a consistent investment strategy, regardless of short-term market fluctuations or political events.
The recent economic environment has been particularly eventful, with significant developments including President Biden’s withdrawal from the race and Vice President Harris’s nomination as the Democratic candidate three months before the election. The Federal Reserve’s decision to implement interest rate cuts has added another layer of complexity to the investment landscape.
Despite these various factors that might tempt investors to make tactical changes, Beam warns against falling into what he terms the “cash trap.” He advocates for maintaining a long-term investment perspective, suggesting that attempting to time the market based on political events or policy changes often proves counterproductive.
For investors of all ages, Beam emphasizes the importance of early and consistent saving, highlighting the power of compound interest over time. He concludes that while there may be appropriate times to adjust investment strategies based on major life events or significant economic trends, maintaining a steady course through short-term volatility typically yields the best long-term results.