The political power divide led to contentious negotiations that resulted in last minute approval of an agreement to allow the government to issue additional debt, and to an overdue approval of the 2024 fiscal-year budget. However, the two parties did manage to reach agreement in both instances.
Haworth is skeptical that continued partisan differences in Washington will have a major impact on markets. There may be increasing interest in the election, with President Biden facing what is likely a challenging battle for a second term. Leadership of the House and Senate are also at stake on the November ballot. “The market is currently at a wait-and-see point about the 2024 election, seeking more clarity about the candidates, possible election outcomes and the potential economic and market ramifications,” says Haworth. “Once platform positions are more clearly stated, the markets may begin to look at which sectors stand to benefit based on who is ultimately elected.”
Positioning portfolios today
It’s important to note that several factors contribute to market performance, and it’s not strictly a reflection of the individuals who wield power in Washington or the outcome of any given election. Investors are best served by maintaining a broader perspective.
Depending on one’s goals and time horizon, today’s investor might consider:
- A neutral allocation across fixed income, equities and real assets. The risk-reward dynamic has improved, highlighted by resilient consumers, a healthy labor market and stabilized corporate profits.
- Within fixed income portfolios, tax-aware investors may wish to consider a modest allocation to high-yield municipal bonds and longer duration bonds.
- For non-taxable fixed income portfolios, consider ways to enhance income with positions in non-agency residential mortgage-backed securities while managing portfolio total portfolio duration using long-maturity U.S. Treasury securities.
Regardless of how events play out during the 2024 election cycle, a sound investment strategy is to focus on a properly diversified portfolio that is attuned to your goals, time horizon and risk appetite.
Have questions about the economy, capital markets or your finances? Your U.S. Bank Wealth Management team is here to help.