The stock market has been an anomaly lately. With coronavirus, a volatile energy market, and worldwide business closures, there are many factors that sway the markets other than the election. With that said, the election is sure to have a massive effect on our investments. As we have seen the last four years, just a single Tweet from the president can make or break certain stocks for a time. As a result, you can be sure that the outcome of this election will make waves on Wall Street. So, how should we invest after the election?
Stay Your Hand
As far as Election Day is concerned, I would suggest you wait a little bit. While there may be a pretty convincing victor tonight, it looks like there will be substantial pushback no matter which way it goes. This means you may invest according to one outcome, just to have lengthy court cases or vote counting delays tank your investment. If there isn’t a convincing winner, there is even more reason not to pull the trigger. Uncertainty is not what you want to bank your future on.
Avoid Single-Stock Investing
This is pretty much par for the course when discussing any investing. Whether it is attached to the election or not, stock trading is best done through mutual funds or index funds. this diversification makes the investments safer long-term, and avoids one ruined stock taking your whole retirement down with it.
While some single stocks may skyrocket momentarily off the heels of this election, that growth may not be sustainable. Mutual funds and index funds, like the S&P 500, ensure that you can take advantage of the consistent growth of the entire market. With that said, there are certain industries that you may want to focus on depending on which candidate wins.
The Impact of Your Investment Strategy
Biden has pushed hard for massive government spending on green energy. While he may be slow to enact these plans, stocks in the green energy industries like solar and wind should respond well to a Biden victory. Not only that, but they are more likely to grow if a Biden administration subsidizes them.
Avoid fossil fuel stocks, as Biden has been remarkably inconsistent when it comes to fracking. He has an extensive history of claiming he will ban fracking (or phase it out) to serve the greater aim of complete eradication of fossil fuels. As a result, these stocks will probably not respond well to a Biden victory.
If Trump Wins
To start, take the Biden predictions and flip them around. Fossil fuel jobs have been a topic of note for Trump, and he has been aggressive about protecting those jobs. AS far as green energy goes, he hasn’t been outright hostile, but clearly does not seem to be looking to increase subsidies to their benefit.
Trump is more of an all-rounder play. Say what you want about Trump, but the market seems to love him. If Trump wins, hammer the S&P 500 or index funds like it, and hold. It seems like the entire market will grow faster under Trump, and there is no reason to take unnecessary risks while stimulus is still being negotiated, as that will likely have an even larger impact on Wall Street than the election will.
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