Weekly Executive Update: Red Investor Vs. Blue Investor: What's Next?
Are you advising clients to remain in cash based investments? Or, are you telling investors to buy now because there will be a market boom after the election? While at the outset it seems that investors are relatively similar regarding the starting point regarding their investments, their attitudes about what might happen next are very different, based primarily upon political affiliation. The complete set of data discussed below is included in our complementary executive report Red Investor vs. Blue Investor: What’s Next? The report can be downloaded here.
Regardless of political affiliation, the portfolios of investors are relatively similar. As you can see below, the allocation of total assets and investable assets regardless of political affiliation is basically the same.
Note the amount of cash in all of the portfolios. This is fairly high compared to historical norms but has been at this level for the last few years. Dependent upon the political affiliation of the investor, he or she may be willing to invest this cash, if not now, maybe after the election.
When asked how they would invest if given a hypothetical $100,000 today, 53% of Republicans would invest in the market compared to only 41% of Democrats, who would keep the assets in cash. Forty-eight percent of Independent voters would invest the money in the market.
What does this mean for financial advisors and how should they help their clients through this volatile time?
1. Sensitively try to determine the investor’s own outlook regarding the market after the election. While fewer than half of all investors are confident about the economy overall in the next 12 months, dependent upon their own political affiliation they may be more or less open to investing at this particular time.
2. Investors have varying attitudes regarding key issues. Republicans are more concerned about “law and order” while Democrats are more concerned about Covid. Overall, investors of all types are worried about both of these issues.
3. Proactively reach out to clients during this time. Whether it be via email, text, phone call or whatever method is preferred by the investor, it’s important for them to know you are willing to discuss what is happening.
Just remember, all investors are similar regarding their current asset allocation. Make sure that emotional responses don’t guide their future decisions.
If you are interested in ongoing in-depth analysis of wealthy investors, check out our Wealth Spectrem which provides 6 in-depth (50-60 page) reports and ongoing access to our online analytics allowing analysis by age, wealth, gender, income, occupation, political affiliation and multiple other factors.