Election Recap & YOUR Portfolio (Ep 102)
The election is over, but the real impact on your wallet is just beginning. With potential one-party rule on the horizon, we’re breaking down what these results mean for taxes, tariffs, energy policy, and economic growth. Tune in for a look at why the market reacted so strongly, what new policies could mean for American manufacturing, and practical steps to protect your finances in this new political landscape.
Transcript - The following transcript was generated by a robot, so please excuse any typos or inaccuracies.
Brian Doe 0:01
Well, everybody, the election is over, and everyone's talking about it, so we decided we should too. So stay tuned, and we will talk about what the election outcome means for your portfolio, the economic future, and some of the concerns that we see that could impact your portfolio now.
Speaker 1 0:23
Music, it's time to make the dough rise. The financial podcast with Brian doe, hey,
Walter Storholt 0:32
It's another episode of Make the dough rise. I'm Walter Storholt alongside Brian doe, Certified Financial Planner with living worth Wealth Advisors. You can find us online at living worth.com Brian has more than two decades of experience, and has been a practicing, Certified Financial Planner Since 2013 so over 10 years, over a decade, now as a CFP as well, and looking forward to today's conversation, Brian as we'll talk a little bit of a election post election breakdown and looking at the markets and the economy, and can't wait for your unique perspective, as we always get on these topics. But first of all, how's life things settling down for you as we roll into the holidays here? Or has it been a wild and fast fall for you? I
Brian Doe 1:12
think so. We're gonna have a nice, little quiet Thanksgiving coming up. All the girls will be home, and I think Laura's parents are gonna join us. And they had all the damage from the hurricane down in Augusta, and so they've taken in a family that lost, I mean, like, truly lost their house at major, major, major damage, but now they have a family of five with kids and all living in their house with them. So it's kind of an interesting dynamic for them to go to. But yeah, they're gonna come up here and just we'll have a nice, little quiet Thanksgiving, and should be good. We
Walter Storholt 1:47
are now, of course, turning our attention to what happened. We're recording this the week after the election, so it's in our rear view mirror, but not by far. And feel like perhaps everyone's taking a collective breath. I've tried to unplug a little bit Brian from just everything after being very plugged in and tuned in to what's happening in, you know, kind of that politics and election world. I mean, how can you not get away from it? I'm pretty sure I can keep my house warm all winter with the amount of political mail I got over the last couple of Right, right? So, other than those reminders, yeah, I've tried to unplug a little bit and just take a breath from kind of the political talk. I know maybe everybody's not doing that, but what have you been keeping your eye on the last couple of days?
Brian Doe 2:29
Oh, I have spent way too much time, you know, digesting every twist and turn of this election, yeah, partly because, you know, I'm just genuinely interested in what was going to go on, and this had to have been the most spectacle entertaining twists and turn. I mean, we had assassinations and Trump doing his publicity things that comedian makes a comment, and Biden says this, And Obama says that it was just one twist and turn after the others. Whether it's
Walter Storholt 2:58
a healthy thing or not for our country to have that kind of discourse. It's entertaining. Nonetheless, if you can back away and divorce yourself from emotions and thoughts and feelings about it and just look at it from an objective entertainment standpoint, it this movie had everything, right?
Brian Doe 3:14
Yeah, if you had written this script for for a movie, it would, it would have just been, uh, it would have gotten rejected for being too
Walter Storholt 3:21
outlandish, right, right?
Brian Doe 3:22
Probably so. But, yeah, no, it'll be interesting, because clearly it was a resounding win for Trump, and both on the Electoral College and the popular vote. So nobody can Oh, it's the electoral college or the popular vote, and this is illegitimate. It's, it's very clear what the result was. The house looks like the Republicans will have control there, whether it's 53 or 54 seats. I guess it's Arizona, where they can't quite sort it out. And in the house there's, I don't know why it takes these people so long to count their Diagon votes, but it looks like the they're getting maybe four votes away from having the majority in the in the house. So I just went back and I said, What does it look like when one party has control of all three major chambers, or as the judicial branch would be a separate branch, but the House, Senate and presidency, either all one party or split in various different ways. So if you go back and look at one chart that takes results from 1951 to 2023 if you had a scenario where one party dominated the market historically did about 8% which is a couple percentage points below the long term average for the s5&p 100. If you looked at all scenarios where there was a divided government, and that could be any different combo of President and Congress. Because in all scenarios, the markets performed 9.9% so significantly better when you had divided government. And so you could ask, why is that? What would be the cause of that? And it may be because they actually get less done so they can't implement as extreme policies that maybe impact tax or trade or a particular industry like the medical and healthcare industry. So when you have a divide, things stay more stable. Things are more predictable. And from a business perspective, that just allows people to plan and do better and not have to adapt to as many changes. Well, then I looked at the same data, same comparison, going back from 1933 to 2023 at a 90 year time period. Well, if you include all of those years, the unified government had an average annual return of 14.4% compared to a 13.7% for a split Congress, and 11.7% for a unified Congress, but a president in the other party. Well, all of those are actually great returns. I'm not saying that we want to base any strategy or market timing or, Hey, it's time to, you know, get it in or get out based on on the election results, but it's just interesting to compare. And at the end of the day, if you really just back up and look at the growth chart, and this is an American funds piece that that they put out, if you consistently stayed invested, didn't worry too much about which party and which policy and all that stuff, the market has just consistently plotted ahead and moved ahead whether the Republicans or Democrats were in charge. So I think certain industries could do better or worse under certain policies. You could have tax, inflation, debt, we'll talk about all those things here in just a little bit. But you know, that's I don't, I don't think it's any cause for great concern that we have one, one party in control. And maybe, maybe it'll be a good thing, because there are some very systemic things that need to be fixed. Also
Walter Storholt 7:16
a good lesson. Change the timeline and you change the stats a lot. So you can come away with completely different tactics, and I don't know, takeaways, depending on how you shape it. So we looked at this longer term view, what's happened in, you know, historically, in the markets and the economy, kind of looking and saying, okay, so what might this tell us in the in the large picture, the big picture of the future? But let's look at the immediate reactions. Just we're a couple of days post election. So what's caught your eye just kind of in the short term so far? So
Brian Doe 7:46
obviously, the market has responded overwhelmingly positively. We've seen multi 100 point jumps in the Dow, which was one that had kind of languished relative to the other indexes for for some time. I mean, it's kept up, but it hasn't shot up the way the NASDAQ has, but we're sitting on new highs, you know, for all the markets. So it is looking initially very positive. I think the interesting, the two most interesting ones that I saw were the bank stocks and Apple relative to other technology companies. And if you follow Warren Buffett at all, he had been selling a lot of the positions. He'd been selling off his Bank of America, some of his bank stocks, and there are some issues lurking with the banks, as far as their balance sheets and the long term bond portfolios that they're sitting on, and the unrealized losses and and, you know, there, there may still be some fallout from that, but the bank stocks just rocketed it up the last few days. Not entirely sure why. It was the opposite of what I think some big, big investors were thinking then, whereas Apple actually went down right after the election, and I said, well, this doesn't really make sense. All these other tech names are doing so well. But then I thought, Oh, we're talking about tariffs, and Trump has made tariffs and trying to balance out the trade dynamics a little bit with, you know, China that has just dominated and taken over manufacturing. Well, Apple is very highly dependent on China for its manufacturing. They they worked a little bit under the last trump administration to bring some manufacturing here to the US. They did a plant or two, and then I think kind of stopped, and they're still very, very reliant on China. They've moved some to maybe India or Southeast Asia. But if there is a wave of tariffs, that could pretty dramatically impact apple in the short deer. Intermediate term, because it takes a long time to rebuild a production and supply chain. So that was interesting to watch. And then Bitcoin like this, is probably the most pro Bitcoin administration coming in, and it has just, I mean, it's hitting all time highs right now. But let's see in the last what was it? Maybe, for the last week, bitcoins up 10% it's at 83,900 as I look. And for the last month, it's up $21,000 which would be almost a 25% gain. So crazy, crazy. Interesting. What's going to happen with future tech AI crypto and as well as the traditional manufacturing, energy and mining and things like that.
Walter Storholt 10:49
Interesting to see those initial reactions. Do you think that kind of thing is going to have staying power? What are you going to look for through the end of the year and into the into when you know Trump actually gets in office and the admin takes over, and that first 100 day, policy starts coming through. You know what's, what's the, I guess that midterm now, Outlook,
Brian Doe 11:07
yes. So let's, let's take, let's take a look at some major problems and policy. Okay, I don't care what you think of Donald Trump. I don't care what you think of Kamala Harris or if everybody's weird or Satan or Hitler or whatever, all the epitaphs that got thrown out during the election, let's just look at policy. And taxes are going to be a big one. So the Trump tax reforms that were that he pushed through are set to expire in January of 2026 Well, now that he's won re election, it's highly likely that we can get those extended and maybe the current tax rates, the favorable capital gains rates that we have could, well, stay. I would love to see them bring back the or lift the limits on state and local taxes. And I think that's one thing that he has specifically talked about, and probably one thing that would impact my clients the most the and the last time we talked about tips and overtime and all that stuff, if you want to, it'll be interesting to see what all those individual promises end up being. But overall, I think it's going to be good for it to have a lower tax regime, and they may try and lower corporate taxes as well, which would be great for keeping America competitive if they did something that favored companies that actually manufactured and made in America, I think they need to be very targeted and selected on on who benefits from these, these, these tax rates. But that'll be a big issue, and I like the direction that things were headed. I don't think higher taxes and get taxes on unrealized capital gains and things were were the way to go. Energy is another big one, and we are overdue for good energy policy in this country, the green dream, amazing. Love it, if we can. You know, keep keep the environment clean for sure, 100% behind that, but we are sitting on one of the cleanest burning energy sources, natural gas, and the quality of the crude oil this light, sweet shale crude oil, we've got to do something to increase our refining capacity, and look at that as a bridge to the technologies we need to really make clean energy and battery and electric everything. It's just not here yet, and so we have to stop the villainization of carbon and just say, hey, here's a better source. We don't have to import this sludge from Venezuela. We have good, cleaner energy right here in the US. So I think we could could see some good policy that will allow us to proceed with with this great resource that we have here domestically, we're not dependent on the Middle East. We're not dependent on Russia, not dependent on, you know, any Venezuela, whoever you want to cast, as the other alternate source for energy. We don't need them, and we we need to build some infrastructure and make it so that companies are willing to build the refining capacity for those energy sources. So hopefully we'll, we'll see some something positive. There tariffs. I talked a little bit about that with you know, China has been subsidizing their manufacturing, mining, rare earth metals, steel, for so long, and it's been great. We have cheaper stuff. We can buy all kinds of things for cheap that we just have an abundance of stuff now, but we're vulnerable to supply chain issues like we saw during COVID. We have the capacity to do a lot of that stuff over in this hemisphere, and if China's going to just continue. Subsidize those industries and unfairly compete. You know, I'm in favor of tariffs. In that situation, typically, I would not be a big supporter of tariffs. But in this situation where you've got a government subsidizing those industries for too long, it's time to say, hey, either compete fairly or we're just going to, you know, price it in so that you we're going to neutralize the benefit that you're giving in the form of subsidies. So that will be definitely an interesting one to watch. We have talked about manufacturing returning, you know, maybe some of that goes to Mexico, or some of it to Latin American countries and things like that Canada, but I definitely think there's a huge opportunity to bring back some better quality, good paying, maybe higher end manufacturing jobs to the US, and I guess maybe immigration. I don't want to get too much into that one, but it's the immigration that has occurred has provided a huge pool of inexpensive labor, and on one hand, that's good for cost of goods and American competitiveness, but by the same token, it depresses wages for American workers. So it's kind of a push pull type thing. Is it good? It's bad. It's good for this person, it's bad for that person. But I'd really like to see good, solid, middle class quality jobs returning to the to the US. So all of those are, I think are very good policy positions, and I'm not touch any social issues. But just from a pure economic what does it mean for the market standpoint? I think these are all why the market's reacting so positively. And if you compare that to the other side, they were talking about higher taxes, talking about price controls, taxing unrealized capital gains, just giveaways. Here's 25,000 to help you go buy a new house. That's that's inflationary. You really had a financial illiteracy in some of those candidates. Massive government debt just continuing to pile up, and personal debt has has gone back up. It went down a little bit during COVID. That's not that's more of a function of consumer spending than government policy, but something's going to have to be done to address the national debt. Yeah,
Walter Storholt 17:29
and it'll be interesting to see how much of this can get done. What the impacts are. There will be, you know, every action is going to have a consequence. And so some, I think you mentioned it really nicely there with the push pull. Feel, I feel like I get that right? There's going to be, there's going to be some positive and there's going to be something that takes us in this direction, but there's also going to be an opposite force, maybe from a different decision, that pulls you in another direction. And it's, it's not all one, it's not a tug of war where you just are hovering over the center either. It's more like a grid, right? You're going to go a little north, a little West, a little south, you know? So we'll see where kind of we end up when all of those things equal out and even out, and what's possible to get done, because there's there's the policy ideas, and then there's the implementation of everything, right? And those two things never actually match,
Brian Doe 18:15
yeah? And so I think at the end of the day, like, key takeaway for me is we need massive economic growth, and the potential is there. I mean, we have tremendous potential energy resources. Agriculturally, we can feed people. We've got workforce and education that is unmatched around the world, the ability to move goods and stuff around. And we're sitting on the same time on this mountain of debt, 32,000,000,000,033 33 trillion, whatever it is today. It's just, you know, when it was in the 20 trillion, I thought it was too much. And the reality is, whether it was COVID, a financial crisis, Social Security funding, Medicare. There's a lot of government spending that can't be cut, because these are benefits that are promised. We have interest on the debt now exceeds the military budget. So the only way to cut interest expenses to lower the debt or you have to cut military spending. You cannot cut Social Security, Medicare. It's gonna be hard to cut Medicaid, any of those those programs. So it'll be interesting to see if they can reduce spending. But I don't see huge opportunities for it without a absolute revolt. So what has to happen is we have to get this massive economic growth, kind of like we did after World War Two. So the level of debt that we have now as a percentage of gross domestic product is about where we were at the end of World War Two. Did we ever pay off that debt? No, we just outgrew it so that it faded into the rear view mirror and was was so small relative. To the size of the economy, that really didn't matter. So if they can grow the economy and have the future tech, the AI, the increased manufacturing, energy, there's so many things there that could propel this economy forward by trillions of dollars, all I can do is remain optimistic. Now that that's actually going to happen, I'm actually really excited that those things could can and will happen, and we're going to have the right policies in place to make that happen. On the flip side, I don't think this is a good time to be investing in international markets. If you've watched what's happening over in Europe, you know, Germany's got all kinds of problems all the EU countries. I'm not sure what's going to happen with Russia, Ukraine, and what's going on geopolitically on the ground in that part of the world. And so what I'm doing is mostly avoiding that right now, sticking to the domestic companies and and I think that's where all the reward has been for the last 20 years. So, but let's just stick with, with what's, what's working.
Walter Storholt 21:07
I like your perspective on, uh, on viewing the debt, though. Like, if we can just get that to stay stagnant for once, even if it doesn't reverse, please,
Brian Doe 21:14
right? Please. Just like, let's, can we just have one year where it doesn't grow by another $3 trillion right?
Walter Storholt 21:20
If we can do that and then grow the economy. Yeah, that's a big win. It sounds like never thought about it from that perspective before. So that is, that is helpful, and especially, I think the comparison back to those World War Two numbers puts things in perspective as well. So it's maybe not, it's, it's not great news where the the debt is right now, but it also is, at the same time something that we've at least we've been in this vicinity before, and we've gotten out of it from a percentage comparison like you laid out for us. So yet another viewpoint hadn't really thought about from that angle before.
Brian Doe 21:52
That's the answer. I mean, we can cut and try and pay off and have an austerity type mentality that doesn't work. It's painful. It Well, it does work, but if you have to be very disciplined about it, and discipline is not one of those things, I would say applies to Congress and the budget. So let's go with what had the other alternative is, let's crank this thing up and and turn it into a $50 trillion economy. And, you know, maybe keep inflation under control in the process, and have good monetary policy and just do all the things that we know works
Walter Storholt 22:28
at least, turn it back into a minor problem than a major problem. Exactly. It's always going to be a problem, but we can have different levels of focus on it, I suppose. Well, a great outline of all of this, Brian will be keeping our eye on all the changes and the moves and trying to understand it. We know we can lean on you for a little bit of guidance and clarity, trying to figure some of these things out, and at least knowing where to direct our attention. This is something that you know. Brian's always looking at. How can you best position your portfolios for what the realities are now, as well as in the future, and he's working with clients each and every day to put together more stable financial plans, making sure you're diversified the right time to make moves, not timing the market, but the right time to make moves with your portfolio and your economic outlook, all of those things, plus so much more, goes into building A comprehensive financial and ultimately, retirement plan and dealing with your finances and just a very straightforward, objective way, and that's how you experience success in the financial world. And so if you're looking to take some more control over that financial future, but you're not quite sure where to start. Well, usually, a conversation with Brian, a tenured CFP Certified Financial Planner with more than 20 years of expertise is the way to start and begin as a certified financial planner. Just in case you don't know CERTIFIED FINANCIAL PLANNER professional, he meets the highest standards of training ethics and always puts your best interests first when designing these plans. So take advantage of a 15 minute complimentary call with Brian to get clarity about those goals, find out where you stand right now financially and get a more secure tomorrow in place. That's where you start. That's how you begin. That 15 minute call, see if you're a good fit to work with another, one another, and then take it from there. Go to livingworth.com and click book a call, and you can schedule that time to visit that's living worth.com or you can call 706451 9800 706451 9800 all that info is in the description of today's show, and Brian that'll do it for us on this episode. Thanks so much for your help and guidance, and have a great rest of your month, and Happy Thanksgiving to you and your family as well. Yeah, same to you. We enjoyed it. We'll see everybody in December for our next conversation. Thanks so much for joining us, and we'll see you next time, right back here on make the dough rise.
Speaker 2 24:55
Make the dough rise is brought to you by living worth Wealth Advisors with a central. Office in Greensboro, Georgia, but serving the lake country and beyond. The podcast is available on Apple podcasts Spotify and all your favorite podcasting apps. Subscribe today and never miss an episode. Just search for make the dough rise with Brian doe You can also visit make the DOE rise.com to listen to recent episodes if you'd like to contact the show or schedule a complimentary financial review with Brian and the team, just go to make the dough rise.com and get in touch through the website, or call 706-451-9800, thanks for listening to make the dough rise.
Announcer 25:33
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