The $trategist - Investing Through Election Cycles Without Losing Sleep

Q3 2026

Investing Through Election Cycles Without Losing Sleep

Michael Wesolowski

As the midterm election approaches, it seems like there have been several headlines suggesting that political outcomes will have a major impact on the stock market. Articles predicting market volatility, warning of declines, or speculating about winners and losers can naturally leave investors wondering: “Should I be making changes to my portfolio?” or “What should my financial advisor be doing in response?”

These concerns are understandable. After all, most investors have spent years, if not decades, building their financial foundation. It’s natural to worry that significant political events could affect the progress you’ve worked so hard to achieve.

While elections can influence market sentiment in the short-term, history suggests that their effect on long-term investment outcomes is far less significant than many headlines imply. Markets react to new information, and election results often create uncertainty as investors assess potential policy changes. This can lead to temporary market swings, but temporary volatility and long-term growth are not the same thing. When we step back and look at what ultimately drives stock market returns, the picture becomes clearer. Successful companies focus on growing revenue, managing expenses, innovating, and serving their customers regardless of which political party is in power. Over time, these fundamentals have been the primary drivers of market growth, not election outcomes.

This perspective is one of the reasons we value maintaining a diversified, long-term investment strategy. A well-designed portfolio is built to withstand periods of uncertainty, whether they stem from elections, economic headlines, geopolitical events, or other unforeseen challenges. Reacting to every headline often creates more risk than it eliminates.

Interestingly, while market returns during midterm election years (around 7.5% since 1926) have historically been lower than the market’s long-term average (around 10% since 1926), the broader lesson is not that investors should attempt to time the market. In fact, some historical data suggests that market returns in the year following midterm elections have often been stronger than average (an average of 18.8%). The challenge, of course, is that no one can predict when those gains will occur. Investors who move to the sidelines often risk missing the recovery they were trying to anticipate.

One of the cornerstones of our planning and investment philosophy is discipline. Successful investing is about remaining focused on your long-term goals, maintaining an appropriate asset allocation, and avoiding emotional decisions during periods of uncertainty.

As your financial planning partners, our role is to help you stay focused on what you can control: saving consistently, maintaining a diversified portfolio, and making thoughtful decisions aligned with your goals. Elections will come and go, but a disciplined investment approach remains one of the most reliable ways to build long-term financial success.

The next time a headline raises concerns about elections and the market, remember that your financial plan was built with uncertainty in mind. Staying the course is often one of the most productive actions an investor can take.

At Liberty, we help clients stay invested for the long term by planning for short-term needs today. That is why we discuss upcoming expenses, major purchases, and life changes during your review meetings. By preparing for those needs now, we can respond thoughtfully to life’s events rather than react to headlines. We remain committed to helping you navigate opportunities and challenges while keeping your long-term goals at the center of every decision.

Client Alerts

Shannon Nook, FPQP ™

Medicare Open Enrollment

October 15-December 7. It’s your yearly opportunity to adjust or add plan changes. Feel free to reach out early to independent Medicare agent Stephanie Wagner at wiscareins.com paid by the insurance companies. In addition, we utilize www.65-incorporated.com offering one-on-one consultations, based on time, by Medicare experts who are not salespeople.

Tax Expansions That You May Qualify for This Year

Note that most qualifications are based on Adjusted Gross Income (AGI) or Modified Adjusted Gross Income (MAGI).

Federal Changes

• Increased Cap on State & Local Real Estate Deduction: $40,400 deduction cap applies but phases out for AGI above $505k.
• Bonus Senior Deduction: Taxpayers age 65 or older may qualify for an additional $6,000 deduction per person. These phase out                 gradually for MAGI between $75k–$250k.
• Tips & Overtime: Qualified tips deducted up to $25k, and overtime between $12.5k-25k.
• Non-itemizers can deduct up to $1k for single & $2k joint in cash donations to charities.
• 1099-NEC & 1099-MIS reporting threshold goes from $600 to at least $2k in income.

Wisconsin State Expansions

Retirement Income Exclusion for Seniors: Wisconsin taxpayers age 67 or older may exclude up to $24k per person from retirement income (IRA, pension, annuity), regardless of income level. Note: This exclusion may reduce eligibility for other WI credits, including:

• Wisconsin Property Tax Credit
• Itemized Deduction Credit
• Married Person's Credit
• Credit for Taxes Paid to Other States

If we prepare your taxes, these updates will be automatically incorporated into your 2026 tax planning and preparation. Otherwise, we recommend checking with your tax advisor to determine how these changes may impact your situation.

NEW for 2027 Returns

Saver’s Match is a new federal program that matches a portion of the money you save for retirement. If you’re eligible and contribute to a retirement plan or Individual Retirement Account (IRA) for 2027. Watch for more on this soon!

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