Election Jitters: How to Emotionproof Your Portfolio Amidst Market Volatility
The upcoming U.S. presidential election is casting a shadow of uncertainty over the stock market, with strategists predicting increased volatility in the months leading up to November. This anxiety isn’t just confined to Wall Street; a recent American Psychiatric Association survey found that 73% of people reported feeling anxious about the election. These feelings are leading some investors to become more reactive, potentially jeopardizing their long-term financial plans. "When we become emotionally charged, we become rationally challenged," warns financial psychologist Brad Klontz, a member of the CNBC Global Financial Wellness Advisory Board. "In times of uncertainty, which is typical around election periods, we are really prone to just absolutely destroy ourselves financially."
Key Takeaways:
- Election anxiety is real: Many people, including investors, are experiencing heightened anxiety about the election’s impact on their finances.
- Emotions can cloud judgment: Fear and uncertainty can lead to impulsive financial decisions that may harm your long-term financial goals.
- Don’t let fear dictate your actions: Stay focused on your goals, analyze your fears objectively, and prioritize long-term strategies over short-term reactions.
Picture Your Goal: Visualize Your Financial Destination
When election worries start to creep in, it’s crucial to shift your focus to your financial goals. Visualize what you’re working towards – be it paying off your mortgage, buying a car, or achieving retirement security. "If your goal is to pay off your mortgage, or buy a car, put a picture on your front door, put it in your office, that’s your vision, that’s your goal that you’re working for," advises Erika Wasserman, a financial therapist in Miami. "The election that’s going to happen is going to happen. Your input isn’t going to change that one way or the other, for the most part."
Deeper Dive into Your Concerns: Journaling for Clarity
Don’t just dismiss your anxieties. Instead, engage with them. Keep a journal to record your worries and identify recurring themes. This helps you understand the root of your anxieties and whether they’re based on factual concerns or purely speculative fears.
Fact or Fiction: Separating Real Threats from Hypothetical Worries
While it’s natural to envision various "what if" scenarios, the likelihood of those worst-case outcomes materializing is often lower than imagined. The election is months away, leaving ample time for the situation to evolve. Moreover, the outcome of the election doesn’t guarantee specific policy changes. Political campaigns often use emotional appeals to secure support, but their promises don’t always translate into reality.
The Power of Perspective: Historical Trends and Emotional Reactions
"We’re very emotional, and that’s actually the biggest risk we’re facing right now," acknowledges Klontz. He emphasizes that historical trends suggest the stock market tends to experience volatility before elections but typically rebounds after the outcome is decided, regardless of political affiliation. "Because all of a sudden things aren’t quite so uncertain, and so everyone relaxes a little bit," he explains.
Reality Check: Truth vs. Fiction
After identifying your worries, systematically evaluate them as either "fact" or "fiction." "Then you can deal with the stuff that’s the truth, and the stuff that’s fiction put aside for another day until that really comes about," advises Wasserman.
Reassess and Realign: Revisit Your Goals and Investments
Use your election anxieties as a catalyst to reflect on your financial strategy. The current market stability and relatively healthy economy provide a good opportunity to review your investment portfolio and ensure it aligns with your long-term goals. "That’s a really good thing to do, no matter what, every couple years," recommends Megan McCoy, a financial therapist and professor of financial planning at Kansas State University.
Professional Guidance: Seeking Tax and Financial Expertise
Consider consulting with a tax and financial professional to review your investment strategy, particularly if uncertainty has stirred any doubts. These experts can help you ensure your funds are strategically allocated in appropriate accounts and understand the potential implications of future economic changes. "What is the wisest decision you can make with the information you have now, because we really can’t predict the future," Klontz reminds us.
Stress Management: Turning Worries into Actionable Strategies
Some individuals may find themselves spiraling down a path of worry, fearing a market crash, worsened inflation, or job insecurity. McCoy advocates using this stress constructively by taking action over the aspects you can control.
Breaking Down Stress: Identifying and Addressing Root Causes
"Spread out all the stressors, all the worries, maybe write them all down to get to the actual root of your fears," she suggests.
Turning Fear into Action: Implementing Controllable Strategies
Once you’ve identified the source of your anxieties, map out specific steps you can take to address these issues. "Use that as an outlet for the stress and anxiety," McCoy encourages.
By embracing these strategies, you can navigate the emotional turbulence that often accompanies election season and maintain a focused, long-term approach to your financial well-being. Remember, your financial future doesn’t hinge on the outcome of a single election. By staying informed, managing your emotions, and making informed decisions, you can weather any storm and continue to progress towards your financial goals.
