A quick matter of housekeeping: What follows is NOT a discussion of partisan politics. No specific candidate or party will be endorsed here.
With that out of the way, it’s not a stretch to say that advisors and clients that aren’t living in caves know that 2024 is a presidential election year. The candidates and parties will tell voters this is the most important election of our lifetimes, just as they do every four years. What’s not debatable is that the 2024 campaign will be as acrimonious and contentious as any on record. It’s already shaping up that way.
There’s more for advisors to consider. Clients are inundated with political news and updates. Some of them may be actively seeking out such information. That’s their prerogative. Problem is electoral politics have a way of adding to investors’ anxiety, of which they’ve already got plenty due to rising interest rates and stubbornly high inflation, among other factors.
Translation: Advisors should be prepared for more election-related conversations as 2024 draws closer and be prepared to potentially navigate clients through what could be a trying time next year.
Not All Bad News
Engaging in partisan political conversations with clients is a no-no and many advisors already know that. On that note, money managers should also realize that some clients will perceive election results through the lens of good or bad news.
For the time being, there’s not much of either as it pertains to 2024 elections affecting client outcomes. That is actually a good thing.
“As the press starts to focus more and more on the 2024 election, so have our clients leading many questions to come our way about who we think will be the next president and what we think they might do that could influence markets,” notes Michael Zezas, Global Head of Fixed-Income and Thematic Research for Morgan Stanley. “We obviously care a great deal about elections and their consequences for markets. So then you might be surprised to know that our response so far to 2024 election questions has been, 'Nothing to see here, at least not yet'.”
That’s apt to change as voters (clients) get more clarity on candidates and as the issuers that matter most to voters ebb and flow. History proves what matters to voters in the year before a presidential election can and does change when the calendar turns to the new year. The 2008 and 2020 election cycles prove as much.
“In 2007, the 2008 election seemed poised to be all about foreign policy, but then the financial crisis hit and markets again cared about how the outcome would affect potential fiscal stimulus and bank regulation,” adds Zezas. “We could go on, but the point is this, history tells us this election will matter greatly to markets, but it's way too early to reliably know how it will matter.”
Advisors Should Prepare So Clients Don’t Have To
The great thing about U.S. elections is that there are clearly defined winners and losers. Add to that, the much maligned two-party system has some benefits in terms of advisors preparing for various outcomes.
It’s not a task advisors need to get carried away with today, but knowing some areas of focus can help and be of benefit to clients.
“In particular around tax policy, tech regulation, defense spending, and refreshing our framework for how fiscal policy in the U.S. reacts to political conditions and party control in Congress,” concludes Zezas.