Your candidate didn't win. Guess what? Your portfolio doesn't care.

Your candidate didn’t win. Guess what? Your portfolio doesn’t care.

November 8th, 2024 [4 minute read]

By Drew W. Boyer, CFP®

I’m purposely writing this blog on US election-eve to prove a long-term point to you. I care not of short-term, media-created reactions.

Who knows if the first boomerang president since Grover Cleveland or the first switch-a-roo president was elected- let alone have a winner yet for any race. One can always remain hopeful, patient, and sane in the democratic process. Running a republic was never meant to be fast, efficient, or fulfilling. Don’t worry, be happy everyone.

Per every election now, this is “the most important one ever” or not. I have no vested interest in this cycle other than hoping people walk away feeling their votes count, because when you don’t, they’ll simply stop counting them. I personally care more about local elections as they have a more immediate and lasting impact than the national races.

All this said, remember these three big things:

  1. Half of my family grew up in communist-run East Germany where they would’ve killed to vote. A lot of people would love to be in your shoes.
  2. There’s a reason why someone invented the word ‘COMPROMISE’. No one ever exclusively gets there way in family or business, so why would you think government should be?
  3. When we fight each other, who wins? Our enemies. United we stand, anyone?

Enough about politics and on to actual investing.

My friends at TCW created this S&P 500 returns chart from the early 1930’s to 2023, overlaying which president presided over the corresponding time periods. If you take away red or blue, what pattern do you overwhelmingly see?

It’s overwhelming far up and to the right. The numbers don’t lie.

Fear not, my friends. History may not repeat, but it rhymes and it’s no different this time. There are of course ‘brief’ periods of time that you can feel like you’re ‘losing’ or ‘going nowhere’, but you must look at it through the correct lens. Remember this in a world full of AI-generated truths, mistruths, and confusion to our ever-shortening attention spans. Seek the truth, limit distractions, and keep the right perspective.

The biggest near-term financial consequence is the expiration on the TCJA 2017 tax reforms on December 31, 2025. I’d bet that most accountants are voting for a split ticket. Why? For those of you who’ve enjoyed using the standard deduction, in 2025 alone, MFJ (married, filing jointly) taxpayers will be able to deduct off $30,000. That number will get diced in half in 2026 (~$15,000) if the TCJA tax reforms are left to expire.

Besides the halving of the standard deduction, the $10,000 limit in SALT (State And Local Taxes) will expire as well. Besides itemizing your home mortgage interest, you’ll get to deduct-out your combined SALT as well. Pro Tip: I’ve actually encouraged some clients with a paid-off first home to buy a second home with a mortgage and rate of 7%-8%.

Why? Because they had a goal of splitting their time elsewhere and for the option of future deductions if they need them in 2026. If they don’t, we can always pay it off sooner.

Another bonus: remember to keep any charitable contributions for additional deductions. Those are all considered itemized deductions you most likely haven’t been deducting… yet.

Unless you’re running your own small business, the only other income deductions fall on the first page of your 1040. If you have a Heath Savings Account (HAS) option at your employer, consider maxing it out for 100% deductibility now. Also, if you have an employer-sponsored retirement plan (401k, 403b, 457b, etc.), your pre-tax contributions (NOT-ROTH) can help you lower your income taxes now. There are generous maximums available, so utilize them.

Don’t have an employer-sponsored plan? Depending on your income, you can still open and fund an IRA up until April 15th of the following year, for a deduction in the previous year. It’s your personally allowable time machine for a tax deduction. I love this country.

Bottom line: this election is more than just a few social or geopolitical issues. If you’ve enjoyed the simplicity of the standard deduction, you may have to get a whole lot more creative with the itemized deductions and work with a CPA.  Need one? I have a great referral to give.

Want to plan ahead instead of getting blindsided in the future? I know a great CFP®. Call my team today.