It’s no secret: political seasons can trigger intense emotions. But should those emotions guide your investment decisions?
In Episode 113 of the Last Paycheck podcast, Rob and Archie Hoxton explore how politics—left, right, or center—can quietly sabotage even the most thoughtful investors. From fear-induced selloffs to overconfidence when a preferred party is in power, political cycles tend to amplify emotional investing.
And that’s a problem.
Why Political Emotions Don’t Belong in Your Portfolio
Many investors believe that the markets will perform better—or worse—based solely on which party holds power. But the truth is more complex. Historically, markets have performed well under both Republican and Democratic leadership. Why? Because markets respond to long-term economic and business trends—not daily political drama.
As Archie puts it: “The market doesn’t care who’s president—it cares about earnings, interest rates, and business conditions.”
That means your personal reaction to politics could cause you to time the market poorly. And that rarely ends well.
The Cost of Emotional Investing
In the episode, Rob shares a client story about someone so politically stressed they stopped checking their account. When they finally came in for a review—expecting losses—they were shocked to learn their portfolio had actually grown significantly.
This isn’t uncommon. Political turmoil may cause short-term volatility, but long-term market gains often resume once emotions cool. Unfortunately, investors who panic miss the rebound—and lock in losses.
What to Do Instead
A better approach? Create a disciplined plan that can weather political storms:
- Diversify broadly: U.S. and international markets, various sectors, risk-balanced portfolios.
- Rebalance regularly: Keep your strategy aligned even as markets shift.
- Keep investing: Especially if you’re still working. Long-term growth requires long-term participation.
- Stress test your plan: Make sure you’re still on track even if markets dip.
Most importantly: avoid investing based on the news cycle. Markets care more about stability and policy than politics. And they hate emotional investors.
The Real Secret: A Financial Plan
Markets will always swing. Political drama will always exist. But a thoughtful, stress-tested financial plan can give you the clarity to ignore the noise—and keep moving forward.
As Rob says, “Having a plan means you don’t have to wonder whether you’re okay when the market drops. You’ll already know.”
