Prepare for After Election Financial Impact

After months of buildup, the presidential election is finally over. Now that the dust has settled, its important to understand how the results might affect your portfolio, both now and down the road. Guarding Your Wealth" is a nationally syndicated weekly personal finance column written by Jeffrey D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group, a private wealth management firm that employs sophisticated proprietary strategies designed to protect and grow its clients' investments. Please visit our website, www.guardingyourwealth.com to read past articles in our archive.

(PRWEB) November 15, 2004 -- After months of buildup, the presidential election is finally over. Now that the dust has settled, its important to understand how the results might affect your portfolio, both now and down the road.

Since the beginning of the year, the stock market has been in one of the longest trading ranges in history. After gaining 25% in 2003, the S&P 500 index is currently trading close to where it began in 2004. Dont let that deceive you-2004 was a volatile year.

There were declines of 8% during the year in the S&P 500, 19% in the NASDAQ, 11% in the S&P 400 Midcap Index and 14% in the Russell 2000 Smallcap Index. Even though these indexes have recovered from their losses, its been a roller coaster ride for many investors.

The stock market doesnt like uncertainty and theres been plenty this year. Much of that uncertainty centered on taxes, as Bush and Kerry had very different plans in mind. For instance, President Bush lowered the taxes on dividends and capital gains to a maximum of 15% during his first term. He made clear his desire to make these cuts permanent, which would affect companies decisions concerning dividends.

Bush also promised to make the cuts in the capital gains tax permanent, which affects the value investors and analysts place on companies and the markets as a whole.

Income tax rates affect the timing and amount of investment decisions as well. The higher the income tax rate, the greater the incentive to invest in tax-deferred retirement programs or tax-free municipal bonds.

Adding to the uncertainty, Wall Street was concerned over the possibility of another disputed election like we saw in 2000. The makeup of the Congress was also important since that would affect the ability of whoever won the presidential election to implement their agenda.

On November 3rd, much of this uncertainty was erased. It became clear that President Bush won re-election. And the markets reacted by going up. I believe the markets would have gone up regardless of who won since the uncertainty was removed and investors could factor the results into their decisions.

Looking ahead, President Bush has stated he intends to reform Social Security. Most believe that this will include the ability of younger workers to direct a portion of their Social Security tax into an account for which theyll make investment decisions.

The more likely private Social Security accounts become, the more the stock market will go up. When I became a broker in 1987, very few people had 401(k)s. Now almost everyone does. Much of that money is invested in the market. I believe that is one of the main reasons the markets have gone from 3000 on the Dow Jones Industrial Average to 10,000 over the last decade. It stands to reason that private Social Security accounts would have an even greater impact.

The President will encourage saving for retirement by proposing Retirement Savings Accounts. Company retirement programs may be reformed and simplified as a result. Proposed Lifetime Savings Accounts will allow after-tax money to be accessible and earnings tax-free. These too will have a dramatic impact on the stock market.

On the other hand, there is concern that these proposals will increase the deficit. Thatll cause interest rates to go up. When interest rates go up, bond prices go down. The result is that bonds may return far less over the next five years then they did in the last five years.

So how should you invest? For those younger saving for retirement 5-10 years from now, the stock market should allow you to grow your wealth and reach your goal sooner. For those retired it is important to divide your portfolio between cash, bonds, real estate and equities. The percentages in each will depend on your particular comfort levels and financial situation.

For my clients, we had greatly decreased the amount they had allocated to equities over the last few years. Looking forward, we are now increasing those amounts. Of course, I actively manage monies devoted to equities to make sure that a small loss doesnt turn into a devastating one. If your advisor doesnt, it will increase your potential for loss when investing in stocks.

Questions? Concerns? Id be happy to provide clear, unbiased advice free of charge.

Mr. Voudrie is a Certified Financial Planner and the President of Legacy Planning Group, Inc., a Private Wealth Management firm in Johnson City, TN. For more information call 1-877-827-1463 or email jeff@guardingyourwealth.com.

Looking for an energetic expert who is passionate about financial and wealth management? Mr. Voudrie is an excellent speaker who will excite and inspire your audience. Mr. Voudrie is available for a limited number of speaking engagements, television appearances and radio talk shows. For booking information, contact Christine Lavender at (877) 827-1463 or email christine@guardingyourwealth.com.

Related Articles can be found at www.guardingyourwealth.com under the Guarding Your Wealth Article Archive.

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