What might happen to your investment portfolio if former vice-president Joseph R. Biden Jr. should become the next President of the United States. How might you re-jigger your portfolio?
According to Kelly Campbell, the CEO of Campbell Wealth Management, Biden favors higher taxes, more regulations, and a bigger government. “The market doesn't like any of those things,” said Campbell. And so, the markets, more likely than not, could go down, he said.
On the other hand, the markets already like President Trump’s policies – low tax rates and fewer regulations. So, if President Trump gets re-elected the markets could go up, he said.
At a minimum, no matter what happens in the election, Campbell said investors ought to have a target asset allocation of 60% stocks, 40% bonds. With that classic asset allocation, investors would have upside potential and downside protection. “It really is the best mix of risk versus return,” he said.
Campbell also said it’s important to look at what you shouldn't have in your portfolio right now, as well as what you should have. And at the moment that means excluding or reducing exposure to international, emerging markets, currencies, commodities, and high-yield bonds.
“Bonds are supposed to be there for stability,” he said, noting that investors might often have 20% of their portfolio in high quality bonds and 20% in high-yield bonds. But high yield bonds act more like stocks than bonds. So, when the market crashed earlier this year “high-yield bonds went down almost as much as the stock market,” said Campbell. So, if you're making adjustments to the fixed-income portion of your portfolio, increase your allocation to high quality bonds and decrease your allocation to high-yield bonds.
For more, read Campbell’s article, How the Election May Affect Your Retirement, on TheStreet’s Retirement Daily.