2. Review your asset allocation
An election can impact the performance of the stock market. If the election is contested, the uncertainty would likely cause a market downturn. Or, perhaps the new president plans to make changes to capital gains tax rates. Investors might rush to sell off assets before the transfer of power shifts, which could also send stock prices downward.
You want to make sure you aren't exposed to too much stock market risk during these uncertain times. So review your portfolio to ensure you have an appropriate percentage of your money in the stock market given your age. You may want to explore safer investments such as CDs or money market accounts for funds you aren't ready to risk in stocks.
3. Consider your investment strategy
You'll also want to be confident in your investment strategy going into the election. Investing for the long term is the best approach for most people. That way you won't need to try to figure out how the new president might affect the short-term price of your investments.
When you stick with stocks for decades and you pick solid companies or a diverse pool of ETFs, price changes caused by a shift in political power won't faze you. That's because they're unlikely to affect your portfolio performance in the long run.
4. Understand each candidate's financial plans
The different policies presidents put forth could change your finances in profound ways. You may see a tax cut or a tax increase, for example, or you could find your health insurance options change.
It can be difficult to know how to react to an election outcome if you don't understand what it could mean for your financial future. So review each candidate's position on topics such as taxes, healthcare, minimum wage, and other key issues related to your money. Use this to guide the steps you may want to take after the election.
If the president-elect has indicated an intent to raise the capital gains tax rate, you may want to sell some of your winning investments. An increase in the capital gains tax rate could cut into your earnings. If the president-elect is in favor of decreasing Social Security benefits, on the other hand, you may want to increase the amount you invest for retirement. You may want a larger nest egg in case you end up with a smaller-than-expected Social Security benefit.
5. Repay high-interest debt
The election of a president could cause the Federal Reserve to change interest rates. Rates are currently set near 0% and thus can't fall much further without going into negative territory. However, it is possible the Federal Reserve might raise rates pending the outcome of the election.
If rates go up, the interest you're paying on variable-rate loans could rise substantially. Rather than take this chance, you might pay down as much debt as you can.
6. Determine what money moves to make now -- and which ones to put off
You may be considering certain financial moves, such as refinancing a mortgage or buying a home. You'll need to decide if you want to take action now or if you might be better off waiting until after the election.
Mortgage rates, for example, are near record lows now. There's little reason to believe they'll go much lower after the election. You may decide it's better to buy a home and secure a mortgage ASAP before the new president takes office rather than risk a rise in rates.
On the other hand, perhaps you're considering some energy-efficient upgrades to your home. Let's say you also suspect you could be entitled to more tax credits after the election because the winner might undertake ambitious plans to bolster the green-energy industry. With this in mind, you may decide you'd rather wait on those upgrades.
No one can predict with certainty who will win or what they'll do when they take office. As such, there's risks associated with both acting before the election and waiting until it's over. But, in general, you can weigh up the potential upside of waiting against the current cost. If the post-election benefits are limited and you're happy to act under current conditions, it may make sense to make the move now. That way, if the election turns out differently than you expected, you won't be any worse off.
