Don’t Panic About the Election! (Do This Instead)

If you’re worried about the impact of the upcoming election on your finances, you’re not alone. Whether it’s tariffs, taxation, or industry regulation, Vice President Kamala Harris and Former President Donald J. Trump have presented two different policy agendas that, if enacted, could impact the economy, the markets, and your finances. One of these two candidates will prevail in just a few short weeks. So, what should you be doing to protect and optimize your financial assets?

According to our investment, taxation, and estate planning specialists, there are constructive steps you may want to consider. However, there’s one thing you should not be doing: panicking. Even as the candidates grab headlines with proposals for increasing the top tax rate on long-term capital gains to 28% for taxable income above $1 million (Harris) or imposing a universal baseline tariff of 10%—20% on imported goods (Trump), a victory for either one is unlikely to have a significant impact on your portfolio.

In this article, we’ll discuss some of the causes for concern and explore reasonable measures that will help keep your financial plan—and sanity—intact.

The Case for Calm

Let’s start with the 30,000-foot view. “Yes, of course, there are differences in the policies and the intentions of both parties,” says Chief Equity Strategist Jim Lebenthal, CFA. “But when the election concludes, we’re probably, as a nation, going to have declared that we want a divided government, meaning that at least one House of Congress is held by a different party than the White House. That is the setup from which good, thoughtful compromises are reached.”

According to The Associated Press, control of the Senate is likely headed to a 50-50 split with the retirement of independent Sen. Joe Manchin of West Virginia. The House is also a toss-up. Without a supermajority, let alone control of both the House and the executive branch, neither side will be able to enact their most ambitious agenda. Instead, they’ll need to reach across the aisle for votes, so we’re more likely to see legislative tweaks than revolution.

The Impact on Investing

To see how presidential elections affect the markets, Joe Matus, CFA, a member of the Cerity Partners Investment Office, reviewed the long-term data for U.S. large-cap stocks going back to 1926. “Over that nearly 100-year period, the average two-month return for November and December was 2.4%. In a presidential election year, that two-month average is 2.6%,”he observes. “When a Republican wins, the average is 3.7%; when a Democrat wins, it’s 1.7%. So, the initial reaction to election results has historically been positive no matter the party, although Republican outcomes get a slight nod. While passions run high around presidential elections, their outcomes rarely drive meaningful equity market losses.”

Could a savvy investor capitalize on this data? Unfortunately, no. “The problem is that none of this data is predictive,” continues Matus. “We’ve only had 24 elections during this period, and each time frame is influenced by a variety of contributing factors, including different economic environments, market structures, congressional outcomes, and, of course, different candidates.”

Moreover, if you draw back the lens and look at what happens 12 months after each election rather than just the last two months of an election year, elections don’t seem to have much of an impact on equity returns. “In any given 12-month period since 1926, equity market total returns are positive about 76% of the time,” notes Matus. “In the 12-month period after elections since 1926, equity market total returns are positive 75% of the time. Therefore, you have a 3/4 chance of making money over 12 months, election or no election.”

Should you adjust your investment strategy based on one party’s favorable or hostile regulatory stance to a particular sector? “I would not advise investing around regulation,” says Christopher Burrows, a member of the Cerity Partners Investment Committee. “If you had set your investing plan to the regulations of the current administration, you would have supported green energy, where the investment returns have lagged the broader market. And you might have assumed that tech companies were going to be punished for their monopolistic behaviors and gotten out of that sector before the ‘Mag 7’ stocks absolutely dominated.”

Do Presidential Elections Move Markets?

Joe Matus, CFA, a member of the Cerity Partners Investment Office, reviewed the long-term data for U.S. large-cap stocks going back to 1926. During the 12 months following the presidential elections, he found no strong correlation between the winning party and stock performance. Instead, he found that economic factors, not election results, had more impact on driving performance. Generally speaking, post-election markets are comparable to any other time interval: As long as the economy is expanding, stocks tend to do well.

While Trump-led Republicans want to go very light on regulatory action, and Democrats tend to favor tighter regulation, both approaches need to be taken in context with the Supreme Court’s decision to overturn the Chevron doctrine in late June. In our opinion, that decision is of enormous consequence because it limited how much executive and regulatory action can be taken beyond what Congress explicitly authorized.

What about the debt or deficit level? Would a Trump or Harris win have an impact that changes the calculus? Probably not. “In my lifespan of investing, I can say that changing your investment stance because of the debt or deficit level has not been a winning strategy,” explains Lebenthal. “At this point, interest rates on the Treasury curve are just not telegraphing that there is an imminent crisis to which Washington will react.”

The bottom line for investors: Elections don’t seem to determine the direction of the stock market, nor should they have an undue influence on your investment strategy. As Bob Shier, JD, explains, “Ultimately, it’s economics, not elections, that matters. After everybody panics or rejoices for 12 1/2 minutes after their candidate wins, the markets will revert to the fundamentals.”

Taming Tax Terrors

The tax changes enacted by the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire in 2025. Beginning January 1, 2026, all individual income tax items will reset to pre-2017 levels, some adjusted for inflation. Tax changes to expect include the return of the personal exemption, an increase in most tax rates and brackets, and the standard reduction getting reduced by nearly half. Most taxpayers should plan to resume itemizing their deductions. Depending on your situation, these changes may have meaningful impacts. However, one of the biggest changes on the horizon is the sunset of the estate tax exemption.

The federal estate tax exemption amount is currently $13.61 million per individual ($27.22 million for a married couple) and is scheduled to increase each year through December 31, 2025. On January 1, 2026, the exemption increases are scheduled to sunset. The sunset, which will happen automatically unless Congress acts, will result in the estate tax exemption amount reverting to the prior $5 million exemption level adjusted for inflation (approximately $7 million per individual and $14 million for a married couple).

Against this backdrop of uncertainty, Harris and Trump have proposed very different visions for tax policy under their respective administrations. According to the nonpartisan Tax Foundation, in addition to hiking capital gains taxes and the corporate income tax rate, Harris has proposed increasing the net investment income tax to reach 5% on income above $400,000. Meanwhile, she’s proposed a series of credits and deductions aimed at helping the middle class and lower-income families. By contrast, Trump has said he would lower the corporate income tax rate, impose tariffs on imports, exempt Social Security benefits from taxation, and make the individual and estate tax cuts of the TCJA permanent. And this summary is not exhaustive. As we enter the final leg of the campaign, pledges to reform and revolutionize the tax code keep coming. As Lebenthal puts it, “We’ve entered the stage where the candidates promise everything from unicorns to free chocolate chip cookies.”

The Candidates Proposed Tax and Policies

As reported by the Tax Foundation, these are the tax policies proposed by the presidential candidates during their campaigns.

Vice President Kamala Harris

• Increase the top tax rate on long-term capital gains to 28% for taxable income above $1 million
• Increase the net investment income tax (NIIT) to reach 5% on income above $400,000
• Expand the child tax credit to $6,000 for children under age 1, $3,600 for children 2-5, and $3,000 for older children
• Expand the earned income tax credit for filers who do not claim children
• Expand premium tax credits
• Expand housing tax credits, including the low-income housing tax credit, a credit for new homebuyers, and a credit for the construction of started homes
• Claw back deductions for depreciation and interest for certain rental construction investments
• Increase the $5,000 deduction for startup costs to $50,000
• Increase the Medicare tax to reach 5% on income above $400,000
• Exempt tips from the income tax
• Increase the corporate income tax rate to 28%

Former President Donald J. Trump

• VP candidate JD Vance has discussed increasing the child tax credit to $5,000
• Make the expiring estate tax cuts from the 2017 Tax Cuts and Jobs Act permanent
• Make the expiring individual income tax cuts from the 2017 Tax Cuts and Jobs Act permanent
• Tax large private university endowments
• Consider replacing personal income taxes with increased tariffs
• Exempt tips from income tax
• Exempt Social Security benefits from taxation
• Impose a universal baseline tariff on all U.S. imports of 10%—20%
• Impose a 60% tariff on all U.S. imports from China
• Lower the corporate income tax rate from 21% to 20%
• Lower the corporate income tax rate to 15% for companies that make their products in the U.S.

Changes to the tax code could have serious implications for your financial plan. While it’s prudent to explore your planning options, you still need to focus on the fundamentals and what makes sense for your unique circumstances.

For example, individuals who could have an estate tax problem as of 2026 might want to consider their available planning options now. However, Paul Chmielewski, who oversees Centralized Estate Services for Cerity Partners, strikes a cautionary note. “In 2012, everybody was concerned that the estate tax exemption was going to decrease from $5 million to $1 million. People made a lot of planning decisions out of fear that they came to regret because, of course, the opposing sides made a deal, and rates stayed at $5 million after all.”

What to Do Instead of Worrying

No one wants to be caught flat-footed in the event of seismic change, but how do you find the middle ground between complacency and overreaction? The key is to cut through the noise and focus on what’s appropriate for you. “If you’re concerned about changes to the estate tax exemption, and you can afford to gift, go ahead and gift,” advises Chmielewski. “But run the numbers and make sure it makes sense for you first.”

Michelle Soto, CDFA®, CFP® says, “An election creates a sense of urgency because of fears about changes to rules and regulations. However, there’s a complex decision tree that you need to go through before acting. If you’re afraid that income tax rates are going up, perhaps you should do a Roth conversion. But does that even make sense in the first place? Are you retired already, and does the math still pencil out?”

“As advisors, our opportunity is to provide balance and perspective for our clients,” Soto concludes. “I want to reassure them that no matter what happens, I am running the numbers and doing what makes sense to keep their financial plans on track.”

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While historical data shows certain market trends around election outcomes, it is important to note that past performance is not indicative of future results. Market reactions to political events are influenced by various factors such as economic conditions and global events. As such, no election outcome can reliably predict future market performance.