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Wall Street Thinks a Biden Win Will Help the Stock Market

By Maurie Backman – Oct 22, 2020 at 6:36AM

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Here's how to prepare for a host of scenarios that could follow the election.

The stock market has recovered nicely from the beating it took earlier in the year when the coronavirus outbreak sent stock values plummeting. Yet many investors fear that election-related volatility will have similar results this November. Many are already gearing up for a near-term stock market crash.

It's impossible to predict who will win the upcoming election and what impact that might have on stocks, but Wall Street seems to think a Biden victory will be good news for markets. The thought is that if Democrats gain control of the Senate, there could be more long-term economic aid than what Republicans would provide. That, in turn, could not only help the economy bust out of its recession sooner, but also push stock values upward.

Display of stock market quotes

Image source: Getty Images.

Still, investors can't count on this outcome. If you're worried about how the events of the next few weeks might impact your portfolio, here are a few essential moves to make.

1. Boost your savings

Stock values might soar following the election, or they might sink. As an investor, the best thing you can buy yourself in an election year is the flexibility to leave your portfolio alone. To that end, boost your emergency savings fund while you can. Having more money in the bank will give you the freedom to ignore movement in your portfolio -- positive or otherwise.

2. Diversify your stock holdings

A diversified portfolio can help you ride out stock market volatility and capitalize on broad gains. If you're unhappy with your present range of investments, make changes while stock values are still holding relatively steady.

Loading up on S&P 500 index funds is a good way to diversify quickly and painlessly. These give you exposure to the broad market without the legwork of researching individual stocks.

3. Don't just hold stocks in your portfolio

We don't know what the next few weeks or years have in store, so it's a good idea to diversify beyond stocks. Even if you're relatively young, you should have a small portion of your portfolio in bonds, whose interest income you can always reinvent. Another option is to buy real estate, whether actual property or REITs.

How will stocks fare following the election?

It's impossible to predict what direction stock values will head in once the results of the upcoming election are announced. While Wall Street seems to think that a Biden presidency will be more favorable to stocks, let's not forget that the market did well for most of Trump's tenure.

Even if Biden wins, stock values might not climb for quite some time. The market could take a temporary hit as the nation processes the results of the election, for example.

The best thing investors can do is prepare for the worst, but hope that the best eventually comes around.

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