Wednesday, April 24, 2024

The 2020 U.S. Elections and Compound Interest Investing

In January 2017, just a few days before U.S Elections happened, United States President Donald Trump settled in the White House, economic expectations were largely mixed for many investors. On the one hand, the recovery of the American economy during the Obama era was in full swing, and the most pressing concern at the time was that Wall Street was running too hot, thus increasing the potential of a forced market correction. On the other hand, market analysts liked the prospect of an administration friendly towards institutional investors.

Clear Trends of Economic Growths after U.S. Elections

With economic growth firmly on the horizon, compound interest investors had nothing to fear when Trump took office; in fact, banks felt highly competitive through 2017, and they offered greater rates of return on products such as certificates of deposits. Treasury bonds were pretty solid as well. Everything was smooth sailing until Trump fired the first salvo of the trade war with China and other countries in January 2018. At that point, Wall Street investors became skittish because of political tensions, uncertainty, and lower growth expectations.

The global trade war was followed by tensions with Iran, the Special Counsel investigation, and Trump’s impeachment. By the time the coronavirus pandemic was declared in March 2020, investors had already seen the writing on the wall, and we all know what happened next.

Wall Street was a wild roller coaster ride all the way to the general election

For compound interest investors whose portfolios mostly consisted of conservative instruments such as CDs and bonds, the 2020 meltdown of the American economy was not so bad; however, the same cannot be said about investors who hold equity securities because Wall Street was a wild roller coaster ride all the way to the general election in early November.

Compound Interest Investment Strategies Going Forward

In many ways, the highly contested election results of 2020 were not surprising because Trump had previously telegraphed his intentions. Wall Street investors took note of this, and they did not anticipate volatility. What all smart investors are thinking about are the strategies they should be adopting regardless of the election outcome. The predominant opinion is that Wall Street will continue to capitalize on bullish sentiment, and there are various supporting factors.

Whether Trump gets reelected or not is immaterial to the course that many analysts think the U.S. economy will take in 2021. A rebound from the 2020 meltdown caused by the pandemic is pretty much guaranteed because that is the American ethos. If your portfolio is heavy on instruments that earn interest, you may need to wait a couple of quarters before rate growth sets in. No matter what happens, you should try to do everything possible to keep up with monthly contributions because they will always be the pillars of your compound interest strategy.

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