For your planning and investment decisions—put political passions in perspective and stay informed.

Author: Jordan Sprechman
Team Lead, U.S. Wealth Advisory, J.P. Morgan Private Bank


Focus on the 2020 elections already is intense and will no doubt grow as election day draws nearer. Great notice is being given to potential election outcomes, changes a new Congress might make to income and estate tax laws, and what actions you might want to take regarding personal planning and investments. 

It may be tempting to make a move now, especially if you think you know who’s going to win which elected office. But we suggest it’s best not to assume outcomes—and to separate political passions from personal finances. Instead, it is generally advisable to act based on your longstanding goals regarding asset allocation, cash flow needs, access to liquidity and evolving family situations.

Here’s why we make this assertion.

At the federal level, the United States has divided government now. There is a Republican in the White House; Democrats control the House of Representatives; Republicans have a majority in the Senate.

Incumbent presidents seeking another term in the November election usually win: Since 1912, they have done so 72% of the time. However, each of the five times that incumbents have lost, the nation did experience a recession two years before election day.

Democrats currently hold 233 of the 435 seats in the House of Representatives. All House seats are up for election every two years. Democrats must retain 218 this November to keep control of the House and, because of the natural advantages incumbent officeholders have, most observers think they will do so.

Fifty-three of the 100 senators are Republicans. Senators serve six-year terms, and in each election cycle approximately one-third of the Senate seats are contested. This year, there are 35 contests. While incumbents are naturally favored, this year, Republicans hold 23 of the disputed seats, and it’s generally thought to be difficult to retain that many. Democrats would take control of the Senate if they were to “pick up” (turn from Republican to Democrat) a net of four seats–or even just three, if they were to win the presidency (because when votes in the Senate are tied, the Vice President casts the deciding vote).

Of course, winning the presidency (and with it, the Senate tie-breaker) requires winning the Electoral College—not the popular vote. As the United States saw in 2016 and 2000, it is not necessary to win the popular vote to get elected president. Current polls show President Donald J. Trump is trailing presumptive Democratic nominee Joseph R. Biden in key states (including Arizona, Florida and Michigan) that he narrowly carried in 2016 and likely would need to win again to secure reelection.

It is generally assumed there will be few significant changes to the income and estate tax regimes if the elections produce another divided government or unified Republican government. However, Democrats have indicated a willingness to reexamine tax law, and if they gain control of the White House and Congress, they may do so. 

Question is: How soon might such potential changes affect you?

Our answer: Election day should be thought of not as the deadline for planning decisions, but as a starting gun. Only once we know the composition of the next government, and the legislative calendar for 2021 begins to take shape, should planning responses be fully contemplated.1

Since the end of World War II, there’s been this one constant, regardless of the occupant of the White House and the composition of Congress: Equity markets increase in value over time.  Some stocks, sectors or styles do better at some times than others, depending on specific, often unpredictable factors—a fact that underlines the importance of diversification. That is why, to ensure the long-term health of one’s portfolio, we think that time in the market, rather than market timing, is key. Consequently, we advise clients to stay invested, regardless of specific events—including election results.

Certainly, the manner in which your portfolio is managed may change as you experience key “life events”—such as getting married, having children, buying a house, moving to another state, planning retirement. But the impetus for making fundamental changes to your investment approach should be driven from the inside—not by external events that, in retrospect, will often seem unimportant when compared to preserving, growing and managing wealth for yourself and your family.

In short, our best advice is not to let the passions of this election lead you to make any key planning or investments decisions. Stay informed about our national debate, but wait for the results and keep the conversation about your personal goals going with your J.P. Morgan team. 

1 It may be possible to give tax law changes retroactive effect (perhaps as soon as January 1, 2021)—but there are significant obstacles to that occurring: Congress is not sworn in until January 3, 2021. A new president would not be inaugurated until January 20. The 535 members of Congress, regardless of party, have priorities they would like to see enacted, and the process of turning bills into law can be slow. In the past 30 years, one party or the other has controlled both houses of Congress and the presidency in the first year of a new president’s first term four times (1993, 2001, 2009, 2017). In none of those years was tax legislation enacted before June, and only in 1993 were tax rates—and only tax rates—made effective to the beginning of the year.