How to prepare your portfolio for the 2024 elections

While you can’t predict who’ll win which race, you can take steps to position your finances for any outcome.

If some political commentators are to be believed, every presidential election is the most important in history. Whether that’s true or not is a topic of debate for future historians. But it is undeniably the case that individual investors need to consider the consequences elections can have for taxes, markets and the economy.

“The election matters,” says Alan McKnight, Chief Investment Officer at Regions Bank. “If there’s a material change in leadership in Washington, you could have very different policy, and that would affect the economy in terms of what tax policy is going to be, what regulatory policy is going to be and how those various components affect the economy over the longer term.”

Potential tax changes

There are many examples of how policies that relate to the economy and investors could change, especially if one political party controls the White House and both houses of Congress. For instance, in 2017, the Republican-controlled Congress and White House passed the Tax Cuts and Jobs Act, which made changes to tax rates and mortgage deductions that are set to sunset in January 2026.

“Assuming no action is taken, income tax rates all revert to the pre-Tax Cuts and Jobs Act level. So, the top rate will go from 37% to 39.6%,” says Daniel Grattan, Senior Vice President of Federal Government Affairs for Regions Bank. Other changes in early 2026 would affect high-end mortgage borrowers, including an increase of the mortgage deduction limit from the current $750,000 to $1 million.

For those doing estate planning, another potential change that could take effect in January 2026 is the reversion of the estate and gift tax exemption from more than $13 million (as of 2024) to around half that. The results of the 2024 elections have the potential to change which provisions sunset and when.

The stock market and divided government

It’s impossible to predict election results and adjust your investment portfolio in advance based on the potential policy changes. But history does provide some indication about what to expect in the stock and bond markets during an election year. “If you’re looking back almost 100 years in the equity market, equities underperform nonelection years by a couple percent and bond markets generally remain about the same,” says Grattan. “There has also generally been an increase in volatility, especially in the months and weeks leading up to the elections.”

The primary reason for that volatility, says McKnight, is uncertainty—about the results of the election and thus the economic and policy consequences of who controls the White House and Congress.

The bipartisan boost?

There has in the past been little correlation between whichever political party controls the White House or Congress and superior economic and stock market performance. Instead, the best results for investors have historically come from divided government, when no single party controls both houses of Congress and the White House.

One explanation for improved stock market performance when there is divided government is because it introduces legislative inertia. Divided government also encourages compromise and discourages sweeping and dramatic policy changes.

“Bipartisan cooperation is obviously required to move big pieces of legislation when there’s divided government,” says Grattan. “That’s going to lower the prospects for huge bills and completely removes the likelihood of the budget-related tax plans that can be passed when a single party is in control.” Public companies welcome the certainty that comes when incremental policy improvements are the only possibility.

Elections reinforce the role of planning

Regardless of specifics, elections introduce a lot of uncertainty, at least in the short term. That’s why McKnight believes it’s so important for investors to understand the value of developing a long-term investment strategy. “Elections are going to do what they are going to do, and markets are going to react,” says McKnight. “You want the right exposure to certain assets by having a diversified portfolio that’s very much based on your risk tolerance. It’s critical to have a plan in place and then stick to the plan despite the noise that surrounds you.”

Talk to your Regions Wealth Advisor about:

  1. How to prepare your portfolio for the upcoming elections.
  2. Adjusting your tax and wealth plan for any potential changes that will come in 2025 and beyond.

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