Best Types of Investments to Make as We Head Into the Presidential Election

Dear Wealth Builders,

This is not financial advice but food for thought. As the presidential election approaches, many investors are left wondering how to best position their portfolios to navigate potential market volatility. Historically, election years have brought with them heightened uncertainty, driven by potential changes in economic policy, trade agreements, taxes, and regulatory frameworks. However, with uncertainty comes opportunity. Understanding the macroeconomic trends and potential shifts in government policy can allow investors to capitalize on market movements during this period.

In this post, we’ll explore some of the best types of investments to consider as we head into the next presidential election. From safe-haven assets like bonds and gold to growth-oriented sectors like technology and healthcare, we’ll break down how different asset classes and industries may perform depending on election outcomes, along with practical examples and pro tips for positioning your portfolio.

1. Diversified Index Funds and ETFs

One of the best investment strategies during an election year is to focus on broad-market index funds or ETFs (Exchange Traded Funds) that track large indexes such as the S&P 500 or NASDAQ 100. These funds provide diversification by giving investors exposure to a wide array of stocks, mitigating some of the risks associated with individual stock volatility.

Why They Work:

• Reduced Risk: Index funds spread your investment across many companies, reducing the risk that any one company's poor performance will significantly affect your portfolio.

• Historical Resilience: Despite short-term volatility, the stock market as a whole has historically risen over time, regardless of the political party in power. For instance, the S&P 500 has averaged an annual return of about 10% over the past century.

Example:

If you're worried about market swings in the run-up to the election, an S&P 500 ETF like Vanguard's VOO provides exposure to the top 500 U.S. companies, giving you a balanced mix of growth and stability.

Pro Tip:

Stick to low-cost index funds or ETFs with low expense ratios to maximize your returns over time. Avoid the temptation to "time the market" based on election predictions. Instead, dollar-cost averaging—investing a fixed amount regularly—can smooth out volatility.

2. Defensive Stocks and Sectors

During times of uncertainty, defensive stocks and sectors like utilities, consumer staples, and healthcare tend to perform well. These industries provide essential products and services that consumers need regardless of economic or political conditions, making them less volatile during periods of market turbulence.

Key Sectors to Consider:

• Utilities: Companies in the utilities sector, such as electricity and water providers, offer stability as they provide essential services. Look at stocks like NextEra Energy (NEE) or Duke Energy (DUK).

• Consumer Staples: This sector includes companies that produce everyday essentials like food, beverages, and household products. Stocks like Procter & Gamble (PG), Coca-Cola (KO), or PepsiCo (PEP) tend to remain stable even during economic downturns.

• Healthcare: Regardless of political changes, healthcare remains a necessity. Companies in pharmaceuticals, biotech, and health services often see steady demand. Look for established players like Johnson & Johnson (JNJ) or Pfizer (PFE).

Pro Tip:

Defensive sectors are particularly useful if you're looking for dividend income. Many companies in utilities, consumer staples, and healthcare pay regular dividends, providing investors with steady income during periods of market volatility.

3. Gold and Other Safe-Haven Assets

Gold has long been considered a safe-haven asset during periods of uncertainty, including elections. When markets are volatile, investors often flock to gold to hedge against risk and potential inflation. With the potential for significant market swings during an election year, having a portion of your portfolio allocated to gold or other precious metals can provide a safety net.

Why Gold Works:

• Hedge Against Uncertainty: Gold often performs well when there is economic or political instability.

• Store of Value: Historically, gold has maintained its purchasing power over time, making it a solid hedge against inflation or currency devaluation.

Example:

You can invest in physical gold through bullion or coins, or you can invest in gold ETFs such as SPDR Gold Shares (GLD), which tracks the price of gold without the need for physical storage.

Pro Tip:

Don’t overallocate to gold. While it’s a great hedge, gold doesn’t produce income like stocks or bonds. A general rule of thumb is to allocate no more than 5-10% of your portfolio to gold.

4. Bonds and Bond Funds

During election cycles, interest rates, and thus bond prices, can fluctuate based on perceived economic policies of the candidates. Bonds are generally seen as safer investments, especially U.S. Treasury Bonds, which are backed by the federal government. Bonds provide fixed income, which can be attractive during volatile periods.

Why Bonds Work:

• Stable Income: Bonds provide regular interest payments, which can be a source of stability in uncertain markets.

• Reduced Risk: Government bonds, in particular, carry very low default risk, making them ideal for conservative investors.

Example:

Consider investing in U.S. Treasury Bonds or municipal bonds, which offer tax advantages. You can also invest in bond funds or ETFs like iShares Core U.S. Aggregate Bond ETF (AGG) for a diversified bond portfolio.

Pro Tip:

As the election nears, keep an eye on the Federal Reserve's actions regarding interest rates. If interest rates are expected to rise, shorter-duration bonds may be a safer choice to avoid the risk of falling bond prices.

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5. Real Estate Investment Trusts (REITs)

Real estate is another asset class that tends to be resilient during election years. Real Estate Investment Trusts (REITs) allow investors to gain exposure to real estate without having to buy physical property. REITs typically pay high dividends and can serve as a hedge against inflation, which is a common concern during periods of political uncertainty.

Why REITs Work:

• Stable Income: REITs are required by law to pay out at least 90% of their taxable income to shareholders, making them a great source of regular income.

• Inflation Hedge: Real estate tends to appreciate over time, and rents generally rise with inflation, making REITs a good hedge against rising prices.

Example:

Consider investing in well-established REITs like Public Storage (PSA) or American Tower (AMT), which have strong track records of performance.

Pro Tip:

Look for REITs that invest in sectors with strong growth potential, such as data centers, industrial warehouses (for e-commerce), or healthcare facilities, which may be more resilient to political and economic changes.

6. Healthcare Stocks

The healthcare sector is expected to be a major focus of the 2024 presidential election, especially with debates surrounding healthcare reform, insurance policies, and pharmaceutical regulations. Regardless of the outcome, healthcare stocks tend to perform well due to the constant demand for medical services, drugs, and technology.

Why Healthcare Works:

• Essential Services: The healthcare industry is considered a non-discretionary sector, meaning people need healthcare services regardless of the economic environment.

• Potential for Growth: Advances in biotechnology, pharmaceuticals, and telemedicine present growth opportunities, making healthcare a good sector for both defensive and growth investors.

Example:

Invest in large-cap healthcare companies like UnitedHealth Group (UNH), AbbVie (ABBV), or Thermo Fisher Scientific (TMO), all of which have diversified product lines and strong earnings potential.

Pro Tip:

Stay aware of any proposed healthcare policies that may come with a new administration. Some policies may impact insurance companies or pharmaceutical pricing, so it’s essential to understand the implications of potential regulatory changes.

7. Technology Stocks

Technology has been one of the strongest-performing sectors in recent years, and it’s likely to remain a dominant force, regardless of the political climate. With increasing demand for digital services, cloud computing, artificial intelligence, and cybersecurity, technology companies are poised for growth.

Why Tech Stocks Work:

• Innovation-Driven: The tech industry thrives on innovation, and advancements in artificial intelligence, blockchain, and cloud services create new revenue streams.

• Global Demand: Many tech companies have a global customer base, reducing their reliance on domestic policies.

Example:

Consider companies like Apple (AAPL), Microsoft (MSFT), or Alphabet (GOOGL). These companies dominate the market and continue to innovate, making them strong long-term investments.

Pro Tip:

Be mindful of potential antitrust regulation changes that could impact large tech companies. Diversifying within the tech sector by investing in smaller, growth-stage tech companies can provide exposure to emerging technologies without being over-reliant on mega-cap stocks.

8. Infrastructure and Green Energy Investments

Both political parties have signaled support for increased infrastructure spending, especially in areas such as roads, bridges, and renewable energy projects. As governments move towards cleaner energy and sustainable infrastructure, investments in these sectors could see significant growth, regardless of the election outcome.

Why Infrastructure and Green Energy Work:

• Government Support: Infrastructure spending is often seen as a bipartisan issue, which means companies involved in construction, engineering, and renewable energy could benefit from increased government contracts and subsidies.

• Long-Term Growth: As the global economy transitions to cleaner energy, companies focused on solar, wind, and other renewable technologies are likely to grow.

Example:

Look at investing in infrastructure-focused ETFs like the Global X U.S. Infrastructure Development ETF (PAVE) or renewable energy companies like NextEra Energy (NEE).

Pro Tip:

Consider diversifying within the clean energy space by looking at both traditional utility companies expanding into renewables and smaller pure-play renewable energy companies.

9. Emerging Markets

If you’re willing to take on more risk, emerging market stocks can provide higher growth potential as these economies continue to expand. While emerging markets can be volatile during election cycles, they often outperform over the long term, especially as global trade relationships shift.

Why Emerging Markets Work:

• High Growth Potential: Emerging markets like China, India, and Brazil have rapidly growing middle classes, which can drive demand for goods and services.

• Diversification: Adding international exposure to your portfolio reduces your dependence on the U.S. economy and election outcomes.

Example:

Consider ETFs like the Vanguard FTSE Emerging Markets ETF (VWO), which provides exposure to a broad range of emerging market companies.

Pro Tip:

Keep an eye on currency fluctuations and geopolitical risks when investing in emerging markets, as these factors can affect your returns.

Positioning for the Presidential Election

Again this is not financial advice but food for thought. As we approach the 2024 presidential election, market volatility is likely to increase. However, by diversifying your portfolio across different asset classes, sectors, and geographical regions, you can mitigate risk while still positioning yourself for growth. From safe-haven assets like bonds and gold to growth sectors like technology and healthcare, there are numerous investment opportunities that can thrive regardless of the election outcome.

The key is to stay informed, focus on long-term goals, and avoid making reactionary decisions based on short-term market movements. Always consult with a financial advisor before making significant changes to your portfolio, and remember that no investment is without risk.

By carefully selecting a mix of defensive and growth-oriented investments, you can weather the uncertainty of an election year while still capitalizing on market opportunities.

Best of Luck,

Build Wealth Yourself Team

Accomplish More. Juggle Less.

Your business is growing, and so are your responsibilities. So what do you do?

You do more.

You see a chance to expand your reach and increase your impact.

You do more.

You take on more hours, juggle more deadlines, and wear more hats. You miss a ball game here and there. Come home late a few more nights. You spend a holiday or two in your inbox. And you tell yourself,

This season just requires more.

But what if growing your business isn’t about doing more things — but instead doing the right things?

What if you could enjoy the holidays this year knowing that someone else is handling the “more”?

Your time is too valuable to waste. BELAY’s flexible staffing solutions can help.

Whether it’s administrative, accounting, or marketing support that you need, BELAY’s highly vetted professionals have the more you’re looking for.

Our exceptional Virtual Assistants, Accounting Professionals, and Marketing Assistants combine AI tools with extensive industry experience to ensure that you are always getting more without sacrificing quality or time.

Accomplish more and juggle less with BELAY.

Learn how with our free ebook, Delegate to Elevate, and leave the “more” to BELAY.

Download now