I’m a Financial Advisor: 3 Moves I’ll Make If I Think Biden Will Win the Election
Written by
Laura Beck
Edited by
Molly Sullivan
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The U.S. presidential election is later this year, and many financial advisors believe President Joe Biden is likely to defeat former President Donald Trump. This could have a significant impact on the economy and the markets. Advisors recommend making certain money moves now to ensure your finances are prepared.
In this article, we will examine three smart financial steps to take if advisors’ predictions of a Biden win come true. While nothing is certain until Election Day, preparing your money strategy offers stability in the coming administration.
Prepare For Tax Increases
If Biden wins the presidency, some analysts expect federal taxes to rise, especially for wealthy Americans. Prepare for increases in income, capital gains and estate taxes.
“Expect higher taxes on income, capital gains, and estates, especially if you have a high income or a lot of assets,” said Jonathan Rodgers, CFA at BestDaily. “Biden has proposed to raise the top income tax rate, increase the capital gains tax rate for the wealthy, and reduce the estate tax exemption.”
If you’re at the upper end of the income and asset scale, you may need to factor higher taxes into your financial plan if Biden is re-elected. You may also consider specific strategies like maximizing retirement plan contributions and gifting appreciated assets to heirs. Consult your tax advisor to discuss the best strategies.
Consider Which Sectors Are Likely To Benefit
Biden’s policy agenda aims to channel spending into areas like renewable energy, rebuilding infrastructure, enhancing healthcare access and funding technology research. This government support could provide a big boost to companies operating in these industries.
“Diversify your portfolio to include sectors that may benefit from Biden’s policies, such as clean energy, infrastructure, healthcare, and technology,” Rodgers said. “Biden has pledged to invest a lot of money in green energy and infrastructure, expand the healthcare system, and support innovation and research.”
Work with your financial advisor to tilt your asset allocation toward firms focused on clean technology, infrastructure building, and healthcare services. You may see enhanced returns from these industries. A well-diversified portfolio can help you capitalize on potential gains from targeting these growing subsets of the market.
Look At Refinancing Debt
If Biden wins, you may be able to take advantage of low interest rates by refinancing your debt.
“Consider refinancing your mortgage or student loans, as interest rates are likely to remain low under Biden,” Rodgers said. “The Federal Reserve has indicated that it will keep rates near zero for a long time, and Biden has proposed to forgive some student debt and make public colleges tuition-free for some families.”
If the Fed plans to hold rates low for the foreseeable future, now may be an opportune time to refinance any outstanding loans. Locking in ultra-low rates could lead to substantial interest savings over the life of new mortgages or student loans. Run the numbers to see if refinancing student loans, your mortgage or other debt could significantly lower your interest costs. Consult professionals to run the numbers and see if refinancing makes sense for your situation.
Focus On Long-Term Planning, Not Individual Elections
Trying to time the markets based on election predictions is extremely difficult, even for experts. Rather than making impulsive decisions, stay focused on your long-term goals.
“In general, people care about the elections, the markets do not,” said Bob Clements, a veteran with over two decades of experience in the financial industry. “Having a sound strategy is the best plan. Trying to predict how the markets will do during an election year means you would have to accurately predict the winner, how the markets will respond to that news assuming it wasn’t already priced in, and you must predict accurately who will win Congress and the Senate. Prognosticating like that is outside almost everyone’s expertise and would put your long-term plan at risk.”
While the election results certainly matter, making knee-jerk reactions based on predictions is unwise. Focus on controlling what you can. If you trust your advisors, then continue to work with them, and follow their advice to implement a diversified, balanced plan that can withstand short-term swings every four years. Staying disciplined and sticking to sound strategies is good advice no matter the political climate.
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