Editors' pick: Originally published Nov. 3.
As we count down the moments left in this interminable, unpredictable election cycle, one thing is certain: Many investors are wondering how the outcome will affect their portfolios.
With the economy, trade deals and a variety asset-specific policies on the line, there are many aspects to consider.
Let's look first at the economy.
Whether investors are all-in on the S&P 500 or have a diverse mix of bonds and alternatives, the economy, more than anything, affects portfolios.
It isn't surprising, then, that in our recent survey of financial advisers, nearly half said that the economy should be the next president's top priority in the first 100 days.
Instead of focusing on any single economic factor, look at volatility. Markets detest uncertainty, and with this cycle's abundance of non-policy conversations about candidates, there is little clarity on what either candidate will actually do.
Already we are seeing markets tumble on election uncertainty, and until we have a clearer perspective, there will be volatility.
In terms of trade deals, both candidates take issue with the Trans-Pacific Partnership as well as the existing North American Free Trade Agreement. If these trade deals dissolve, domestic production and jobs would likely increase.
With more money held domestically, U.S.-based assets could strengthen in the short term.
However, there is disagreement about the effectiveness of this kind of trade policy. The argument centers on what is best for the greater economy: a job within America now or a cheaper product available to Americans in the long run.
Among economists, the answer is overwhelmingly the latter. Especially when it comes to trade deals, anything that incentivizes free trade is hailed as good for the economy, despite extremely concentrated, short-term negative impacts.
How much a change in U.S. trade policy will affect portfolios similarly depends on one's perspective.
Short-term investors can capitalize on the change and/or uncertainty. However, for long-term investors, a change in international trade policy could cause downward pressure.