That apparently is the sentiment for nearly half of investors who participated in the Nationwide Retirement Institute’s 9th annual Advisor Authority survey.
In fact, regardless of political affiliation, 45% of investors believe the results of the 2024 U.S. federal (presidential and congressional) elections will have a bigger impact on their retirement plans and portfolios than market performance, according to the findings.
In addition to general pessimism regarding the election's impact on retirement prospects, investors fear the impact of new policy and opposing party rule on the U.S. economy. Nearly a third (32%) of investors believe the economy will plunge into a recession within 12 months if the political party with which they least align gains more power in the 2024 federal elections.
And in a sign of the country’s increasing polarization, roughly the same percentage (31%) believe the party they least align with gaining more power in office will negatively impact their future finances, and 31% believe their taxes will increase within 12 months.
“As we get closer to the 2024 election, we're going to see more messaging and campaign ads that portray worst case scenarios, creating anxiety in investors that can lead to short-sighted, emotional decisions,” said Eric Henderson, President of Nationwide Annuity. “It's important for investors to not get caught up in the 'what ifs,' and instead focus on what they can control.”
Opposing Views
Not surprisingly, some issues are viewed differently across party lines. In this case, nearly 6 in 10 (57%) investors who identify as Democrats say market performance will have a bigger impact on their retirement plans and portfolios than the 2024 election results, compared to only 47% of investors who identify as Republicans.
However, Republicans tend to brace for election results more than their Democrat counterparts, according to the findings. More than two-thirds (68%) of Republican investors believe the outcome of a presidential election will have an immediate and lasting impact on the performance of the stock market, compared to 57% of Democratic investors. Independent investors, meanwhile, are the least concerned with election results; fewer than half (40%) feel the results of next year's election will have a bigger impact on their retirement plans and portfolios than market volatility—the lowest of the three primary political demographic groups.
“While it’s natural to feel the party you support will deliver the best economic outcome, history tells us that these instincts can be blown out of proportion,” said Mark Hackett, Chief of Investment Research for Nationwide. In fact, election results in either party’s favor have historically had little impact on future investment returns, Hackett explains, adding that it’s best to stay focused on the fundamental drivers of investment performance and leading economic indicators.
Older Investors More Fearful
The general fear of a recession is magnified for those closest to retirement ahead of next year’s election, as any wrong decision could have a lasting impact on how they live through retirement. Pre-retiree investors (defined as non-retired investors aged 55-65) are more concerned about an impending economic recession (50%) than investors overall (41%). Pre-retirees and those already in retirement are more concerned about inflation than investors overall (66%, 66% vs. 61%, respectively).
As a result, pre-retirees are planning to be more conservative with their assets than other investors. In this case, Nationwide found that a third (33%) of pre-retiree investors are managing their investments more conservatively in anticipation of next year’s election, compared to just 31% of all non-retired investors.
Overall, investors who are not retired see inflation (47%), an increased cost of living (42%), and a potential recession (31%) as the greatest long-term challenges to their retirement portfolios. To compensate, they are changing their spending and investing habits.
To save more for retirement in the current environment, a third (33%) of investors are avoiding unnecessary expenses over the next 12 months. A quarter (25%) of non-retired investors also say they will need to work longer to save money for retirement in case Social Security runs out of money.
And while recession fears remain elevated, they are down slightly from last year; four in five (80%) investors are now concerned about a U.S. recession in the next 12 months, compared to 85% in 2022. Meanwhile, 40% of all investors and 32% of pre-retirees describe their financial outlook for the next 12 months as “optimistic.”
Advisor Views
While not immune to some partisan bias, the survey found that advisors still maintain a more balanced view of the election than their clients. Despite election jitters, most advisors (56%) believe staying the course—i.e., not changing their clients’ investment strategies—is the best course of action in an election year.
With this approach in mind, advisors are recommending and implementing their strategies accordingly, Nationwide notes. To that end, nearly all (96%) currently have a strategy in place to help their clients protect their assets against market risk, an increase from 92% in the last 12 months.
Annuities (80% vs. 78%), diversification and noncorrelated assets (72% vs. 57%), and liquid alternatives such as mutual funds or ETFs (54% vs. 31%) all saw at least a slight increase as solutions used by advisors to help their clients protect their assets against market risk in the last year, the findings show.
The research was conducted online within the U.S. by The Harris Poll on behalf of Nationwide from August 14-30, 2023, among 507 advisors and financial professionals and 2,404 adult investors with investable assets of $10K+.
