Politics & Investing

Equities are Non-Partisan

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It would be safe to say that this election season intensified emotions and left many investors uncertain of how the results could impact equity markets and their investments.

However, savvy investors have learned that equity markets have historically cared more about an election being over than they have about who won. While you may be disappointed that the person you voted for did not win, stock prices are nonpartisan. They are more commonly tied to earnings and corporations’ health than politics. What equity markets do not like is uncertainty, and the period prior to an election is filled with just that, especially during this most recent, particularly tense election campaign.

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Company earnings, valuations, and the Federal Reserve have historically affected equity markets more than election results.  Strong companies find ways to survive under both Democratic and Republican Presidents. For instance, companies like Apple will continue to develop and recreate their iPhones, and Amazon will continue to deliver packages regardless of who wins the election. The best-run companies typically find ways to advance, regardless of who occupies the White House.

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History has proven that a well-balanced, diversified plan that eliminates emotion is in the best interest of any investor. The election results have left many either optimistic or pessimistic about the coming years. This can test the confidence of many investors, tempting them to make emotional moves in their financial plans.

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Making investment decisions solely based on the election results is not recommended. Emotional investing, or trying to time the market, is typically challenging, if not impossible. Seasoned investors adjust their holdings based on the unique circumstances they are facing and the desired result they are looking to accomplish. A sound investment strategy should focus on the long-term instead of current events or short-term fluctuations. As financial professionals, it is our responsibility to help our clients invest wisely to pursue their goals. If you are nervous or concerned about your situation, please call our office and schedule some time to speak with us.

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Tax Law Changes Are Coming

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Regardless of whether the candidate you voted for won or not, 2025 and 2026 will bring changes to tax laws. The Tax Cuts and Jobs Act (TCJA) is scheduled to sunset on December 31, 2025. Currently, there are many different proposals for extending, expiring, or changing parts of the TCJA. Even if no tax law changes are voted in, tax law changes are scheduled to happen. Here are some items that are on the table investors should be aware of:

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• Income Taxes: You may find yourself with higher or lower individual tax rates.
  
• Deductions: You could have greater or reduced itemized deductions.
  
• Corporate Taxes: Corporate tax rates could increase or decrease.
  
• Qualified dividends and capital gains rates: There could be higher or lower capital gains rates.
  
• Estate Taxes: Estate tax exemptions could significantly increase or decrease.
  
• Child Tax Credit: There could be a potential expansion for those with children.

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We are keeping a close eye on upcoming tax law changes and how they may affect our clients. As financial professionals, we will guide our clients when appropriate so that they may plan and strategize according to their unique situation.

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Diversification & Long-Term Strategies Prevail

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While short-term fluctuations may occur around an election, equities are more influenced by economic factors, including interest rates, corporate earnings, and inflation.  As you can see from the graph, with the exception of 1981 (due to the Energy Crisis Recession) and 2021 (due to the pandemic-driven downturn), one-year post-election, the S&P 500 has had reasonable returns.

Rather than focusing on the latest headlines from media sources that thrive on the dramatic and sensational side, investors should attempt to adopt a plan that can help them navigate a variety of scenarios that may arise. Remember, a financial or tax professional could assist you by helping you build a sensible plan that can help you weather various economic situations, including election cycles. As the stewards of our client’s wealth, we trust that they feel we know their financial situation more than the talking heads on their television screen. We strive to stay current and educated and maintain an unclouded political judgment on any economic issues that could affect their plan so they can rest easily.

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Having a diversified portfolio focused on long-term goals has proven to be a wise strategy for savvy investors. Helping our clients create a well-devised plan that can help them navigate volatility and uncertainty is one of our main goals. Recent history has shown us to expect the unexpected. Regardless of who is sitting in the Oval Office or in the House and Senate, we want our clients to have a plan that can weather a variety of economic scenarios that could occur in the coming years and beyond.

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We like to stay informed of any changes (such as health issues or adjustments to your retirement goals) of our clients. The more we understand about their unique financial situation, the better equipped we will be to advise them effectively.

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We take pride in providing:

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• consistent and effective communication,
  
• a schedule of regular client meetings, and
  
• ongoing education for every member of our team on the issues that impact our clients.

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If you would like to discuss your situation with us, please call our office, and we’d be happy to schedule a complimentary consultation.

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Complimentary Financial Consulation

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Tax law changes are coming!

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Does your current advisor review your situation and consider tax consequences? Would you like a second opinion on your financial situation and plan?

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One of our goals is to help more people with their financial decisions. We would like to offer you a complimentary private consultation with one of our professionals at no cost or obligation to you.

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To schedule your financial consultation, please call us at (714) 597-6510 or email info@fanwmg.com.

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Time is running out!

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Have you considered these potentially helpful strategies to implement before December 31?

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Proactive Tax Strategies Before Year-End (if applicable)

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• Maximized Retirement Plan Contributions
• Completed RMDs (if applicable)
• Explored Roth Conversion Opportunities
• Reviewed Primary & Contingent Beneficiaries
• Considered Charitable GIfting (including QCDs & DAFs)
• Maximized Annual Exclusion Gifts
• Identified Opportunities for Capital Loss Harvesting
• Identified Opportunities for Capital Gain Harvesting
• Reviewed Use of 529 Plans
• Reviewed Use of Potential Deduction Timing
• Reviewed Estate Plan Strategies

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A proactive approach to tax planning, instead of a reactive approach can produce better results! If you would like to explore any of these potential year-end strategies for your situation, please call us!

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Upcoming Webinars & Events

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• FAN Plan Basic Training Webinar | Wed, Dec 4 at 6pm PT
• Tax Training Webinar | Wed, Jan 15 at 6pm PT
• FAN Retirement Classes (Tuesdays) | 1/21, 1/28 & 2/4 from 6:30pm to 9:15pm PT
• FAN Retirement Classes (Saturdays) | 2/22 & 3/1 from 8:30am to 1pm PT
• Tax Planning Webinar | Wed, Feb 12 at 6pm PT
• Investments Webinar | Wed, Feb 19 at 6pm PT
• Property Inheritance Webinar | Wed, Feb 26 at 6pm PT
• Social Security & Medicare Webinar | Wed, Mar 5 at 6pm PT

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Financial Advisors Network, Inc. is a registered investment advisory firm. The views stated in this letter are not necessarily the opinion of Financial Advisors Network, Inc., and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principle. With any investment vehicle, past performance is not a guarantee of future results. Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. This material contains forward-looking statements and projections. There are no guarantees that these results will be achieved. All indices referenced are unmanaged and cannot be invested in directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

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The S&P 500 is an unmanaged index of 500 widely held stocks that is general considered representative of the U.S. Stock market. The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90. Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. Past performance is no guarantee of future results. CDs are FDIC Insured and offer a fixed rate of return if held to maturity. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.

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There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

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