Bill McManus | Wed Oct 24 14:15:00 EDT 2018
Picture this: you’re sitting on your couch engrossed in the newest media meltdown, and you glance out the window for a moment and think to yourself, “I should really go for a walk on this beautiful autumn day.” The thought passes, and instead you turn your attention back to the TV.
A recent survey shared that viewers of cable TV news watch 26,280 minutes of news a year1, which comes out to over an hour of news each day. And now that it’s election season, we can expect TV viewing time to ramp up, especially with networks planning to cover midterm election night as they would a Presidential election.
Consuming too much news, especially with alarmist headlines, could cause your clients to start to panic about the upcoming elections’ impact on the markets. For those clients, here are a few things to remember that you can discuss with them to calm those fears.
1. Investing attention in the negative.
The media understands that the more sensational/dramatic/urgent headlines tend to draw in the most viewers, which is why everything may seem to be presented as a crisis. The media will certainly try to connect the midterm elections to any actual or potential market volatility, so be prepared to talk to your clients about their fears of how the election might affect the markets. If there isn’t any reason for them to be concerned, provide concrete numbers and facts to back that up. Also point out the headlines that don’t get as much attention, unrelated to the election, which can have positive impacts on the future.
2. If it’s not clear, it must be bad.
We tend to apply a negative context to anything that is ambiguous, and elections certainly present us with a feeling of uncertainty. Many clients may be concerned about their investing returns depending on which political party is in power. Take the time to walk them through the actual effects of the different parties being in charge–there really isn’t much of a difference either way. History shows that the stock market (as represented by the S&P 500 Index) generally marches higher regardless of which party is in charge.
3. Risk Aversion.
The pain of a loss emotionally is greater than the joy of a gain, so some clients might choose to play it safe by removing investments completely or halting any contributions. Provide your clients with your experience with market turbulence, specifically during past elections. While losing money is a valid concern, when clients are investing for the long-term, market volatility during one election season is a blip on the radar and can cause them to miss out on the upside when the markets inevitably bounce back. Reminding them of this can help them avoid making impulsive mistakes with their finances.
We certainly want to have an awareness to what’s going on in the world around us, and we want to be informed to help aid in our decisions. But with the media highlighting a different “crisis” every day, and the pressure on the upcoming election, we can lose our heads a bit. As an advisor, it’s important to have these discussions with your clients to calm their fears. However, sometimes the best advice you can give them is to turn off that TV and take a walk!
1 How Americans Get TV News at Home, Nielsen Data & Pew Research Center, 10/11/13. Most recent data available used.