CINCINNATI, Oct. 12, 2016 /PRNewswire/ -- For investors,
weathering the rhetoric of Election 2016 is critical. According to
experts at Fifth Third Bank (NASDAQ: FITB), by maintaining a
steadfast focus on fundamental investment goals and strategies,
investors can make it through the kind of market fluctuations and
uncertainty elections can often create.
To help ease investor uncertainty, Fifth Third Bank convened a
roundtable of financial experts – Nicole
Lapin, veteran financial reporter and author; Joe Gagnon, an economist at the Peterson
Institute; Fifth Third Private Bank's Melissa Register, senior wealth planner; and
Jeff Korzenik, Chief Investment
Strategist at Fifth Third Bank – to provide historical perspective
on how different asset classes and markets respond to changes in
both the executive and legislative branches.
"Historically, elections are periods of uncertainty. Markets
hate uncertainty. They discount valuations in the face of
uncertainty. But those discounts go away when the uncertainty
passes," said Korzenik. "In other words, 'Keep calm and invest
on.'"
Republican candidate Donald Trump
may warn of a future economy crippled by rising taxes, rampant
regulation and stagnant growth, while Democratic candidate
Hillary Clinton may warn about the
ruinous effects of an ever-widening wealth gap and a possible U.S.
debt default. But this election finds most investors worried about
the market as it is, says Glen
Johnson, managing director at Mirador Family Wealth
Advisors.
"When I talk with my clients, there are a lot people asking,
'Will the better times ever return?'" Johnson says. "The old return
rates, in the range of 7 percent gains for equities, might be gone.
Some of the growth we've seen is propped up by low interest rates
and easy credit conditions. But will they still exist after the
election?"
The prospect of a new President and a reconfigured Congress only
makes these questions harder to answer. Although uncertainty has
the ability to impact the markets, today's investors have largely
stayed the course through major question marks like the prospect of
a collapsing eurozone and the slowing economy in China, notes Korzenik.
"The standard election-cycle uncertainty really isn't all that
consequential for overall economic growth," he says.
There are some profound policy differences between the two
presidential candidates. But regardless of who wins or whether the
executive and legislative branches of government are united under
the banner of a single political party, the economy and capital
markets will still likely offer opportunities for investors,
Korzenik says.
"If there is a wholesale shift to, say, a Democratic sweep of
the White House and Congress, that would raise the level of
uncertainty, and could result in tax and regulatory policies that
harm growth in the short term, even if they have worthy long-term
public benefits," Korzenik continues. "On the other hand, a
Republican win of the White House would also raise the level of
uncertainty. Because of the lack of clarity surrounding Mr. Trump's
specific economic policies, we'll be watching closely to see
whether our multi-decade commitment to global trade erodes, which
would pose some concerns."
The Upside of Uncertainty
While the only certainty the elections bring to the markets is
uncertainty, Korzenik is quick to note that uncertainty is not a
code word for a decline.
"In fact, uncertainty can have a bright side for investors,
particularly investors who are focused on specific industries, and
who maintain a long-term perspective," he adds. "For one thing, you
can take advantage of improved valuations, because we know that
uncertainty eventually passes."
One reason for Korzenik's sanguine outlook is that he expects
changes in the U.S. political landscape to have little effect upon
many of the underlying drivers of the overall economic growth.
"We expect more of the same in terms of U.S. economic growth, in
the range of 2%," he says. "Our view at Fifth Third is that as long
as global and U.S. economic growth are going forward, you still
have to have a bias toward, and comfort level with, owning
equities."
Korzenik believes there's reason to expect a small post-election
boost for the economy. Both candidates have promised fiscal
stimulus in the form of infrastructure and defense spending. He
also expects the election to have little effect on interest rates,
with the possibility of two more rate increases in 2017. In that
environment, equities would probably be looking at a positive
single-digit return, he says.
Alternative Assets and Emerging Markets
One area where the election could have a more pronounced impact
is in the alternative assets, such as real estate and the art
market, Korzenik says. That's something to watch closely if the
election brings in lawmakers committed to a higher tax rate on the
wealthy, he says. Transaction taxes or the introduction of new fees
could also have an adverse effect on certain alternative investment
strategies.
But even if that is the case, the election probably won't alter
the way ultra-high-net-worth investors manage their holdings, says
Johnson. "In this class, 40 percent of portfolios are illiquid,
meaning they can't be quickly sold. Hedge funds and private equity
are a bit less likely to be impacted by cyclical events. With
10-to-12-year time horizon for private equity investments, global
macro or short-term events have very little immediate impact."
Michael Donovan, a Fifth Third
wealth management advisor in the greater Chicago area, notes that emerging markets will
continue to benefit from a number of trends, regardless of what
happens at the polls in November
"In the big macro sense, there are a lot of individuals all
across the world who want to be middle class, and that's a trend
you can't really stop. We're a little underweight in emerging
markets right now, but long term, there's a lot of potential in
those countries," Donovan says.
In the end, Korzenik advises investors to maintain a sense of
perspective. "We've changed presidents many times—this will be the
45th—so we've been through these transitions before, each with
their own risks and opportunities. Our aim is to help our clients
to avoid the risks, and find the opportunities."
For more on the potential impacts of Election 2016, Fifth Third
Private Bank has compiled a helpful guide at
http://investing.53.com/FifthThirdPrivateBankElectionOutlook2016.
The five-part video and article series explores the major issues on
the line this November, and how the election may affect retirement,
the economy, investment strategies, taxes, and creating or
preserving wealth for the next generation for years to
come.
About Fifth Third
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio.
The Company has $144 billion in
assets and operates 1,191 full-service Banking Centers, including
94 Bank Mart® locations, most open seven days a week, inside
select grocery stores and 2,541 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West
Virginia, Pennsylvania,
Georgia and North Carolina. Fifth Third operates four main
businesses: Commercial Banking, Branch Banking, Consumer Lending,
and Wealth and Asset Management. Fifth Third also has an 18.3%
interest in Vantiv Holding, LLC. Fifth Third is among the largest
money managers in the Midwest and, as of June 30, 2016, had $305
billion in assets under care, of which it managed
$26 billion for individuals,
corporations and not-for-profit organizations. Investor
information and press releases can be
viewed at www.53.com/. Fifth Third's common
stock is traded on the Nasdaq® Global Select Market under the
symbol "FITB." Fifth Third Bank was established in 1858. Member
FDIC, Equal Housing Lender.
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SOURCE Fifth Third Bank