With the results of Tuesday’s U.S. presidential election still settling in, retirement plan advisers are focused on guiding plan sponsor clients and their participants through its effects on markets, the economy and policy initiatives to come. Many agree that while political shifts can generate strong emotions, a steady, long-term approach remains the best path forward for retirement savers and investors alike.

Phil Sherman, a senior retirement plan consultant at Portland, Oregon-based Deschutes Investment Consulting LLC, emphasized the strong emotional reactions that elections tend to evoke among retirement plan participants.

“The biggest thing that still is on my mind is what an emotional response the election drives from plan participants,” Sherman says. “Just like our national polls showed, we have a mixed bag of participants who are somewhere between thrilled and distraught from last night’s results.”

He explains that this divide underlines the responsibility advisers have to help clients manage emotional responses. Advisers should continue offering educational sessions in 2025 and beyond, aimed at balancing emotions and focusing on sound investment strategies. Sherman says he is reminding investors that history has shown political parties do not usually have a lasting impact on market returns.

Chris DeAndrea, director of retirement plan consulting at Webber Advisors, part of the Leavitt Group, echoes these sentiments. He says the bottom line is that the stock market tends to go up under most presidents, and its trajectory is largely determined by factors such as corporate earnings and interest rates.

“Retirement plan participants are most likely to reach their financial goals by adhering to a long-term investment strategy, and election outcomes should have minimal impact on that approach,” he says.

Marilyn Suey, founder and CEO of the Diamond Group Wealth Advisors, says her firm uses a bottom-up approach to portfolio construction, and will review investments as necessary but with a long-term growth and stability focus.

“Our retirement plan lineups are built to withstand economic ups and downs,” she says, underscoring that the current portfolios are designed for resilience.

Reviewing Investment Menus

DeAndrea says the election itself is unlikely to cause any significant changes to retirement plan investment menus, as most advisers have already decided how they want to handle environmental, social and governance factors (the consideration of which is likely to change under the new administration), as well as other plan design areas, such as including guaranteed in-plan income solutions.

“I also don’t believe this will change the trajectory toward including guaranteed in-plan income solutions, regardless of any new legislation,” DeAndrea says. “I feel that as more plans are educated on these solutions, there will be more plans utilizing these options.”

Looking at investment options, Sherman points out that fixed-income assets could be challenging if interest rates remain elevated. He recommended that advisers and plan sponsors examine their portfolios closely, especially cash-equivalent and fixed-income positions.

“If rates stay elevated, advisers should take a hard look at these positions and assess their resilience to potential rate hikes down the road,” Sherman says.

Policies and Market Trends

With results of a Republican win for both the presidency and control of the Senate, advisers consider how a unified government might affect policies and future market trends. Sherman suggests that certain policies from the 2016 Trump administration could make a comeback, and it would be logical for advisers and plan sponsors to expect such policies during that time.

“I wouldn’t be surprised to see some of the DOL rulings challenged—namely ESG and [socially responsible] investment rules and the fiduciary rule,” he says. “None of that should come as a surprise, as the Trump administration has been very clear about their views on those positions.”

Sherman added a “dark horse prediction:” The Trump administration has been very favorable towards cryptocurrency, he says, and he would not be surprised if it pushes the DOL to look more kindly at that asset class in retirement plans. 

As for markets, historical data suggest that markets perform better when the government is split between parties, according to Sean Kelly, a vice president and financial adviser at Heffernan Financial Services. The composition most favorable to the defined contribution market is when the president comes from a different party than the one largely in control of Congress.

“With a Republican president, and potentially a Republican Congress—both the House and the Senate— historically this [composition] gives us the lowest average annual returns in the S&P 500 when compared to the other potential compositions,” he says. “The highest average annual returns in the S&P 500, looking back to 1950, is when the president represents a different political party than Congress, or at least a split Congress. Maybe that’s because there’s less regulation or legislation passed with that scenario and therefore, the markets just have more room and freedom to run.”

The U.S. economy is still quite strong, and Suey says the expectation is that earnings will continue to thrive, though perhaps not without some challenges.

“If we have a split Congress, there will be some gridlock in new laws, changes in current regimes like taxes, etc.,” she notes. “We are concerned with extreme tariffs on foreign goods that may drive more inflation.”

Tax Policies and Inflation Trends

Taxes and inflation are also central considerations in advisers’ post-election outlooks. Sherman expects that Trump’s Tax Cut and Jobs Act, set to expire at the end of 2025, may be extended under a Republican-led government.

“At the very least, we may see an extension of these cuts, if not more,” he says. With inflation, Sherman notes that the trend likely points toward sustained or higher interest rates, which could add pressure on investments reliant on borrowing costs.

DeAndrea observes that equity markets globally have responded positively to the election outcome, expecting lower corporate tax rates, lighter regulation and lower business costs.

“The markets are pleased with these prospects,” he says, while also cautioning that inflation remains a question mark. “We’ll need to wait and see how inflation unfolds, especially with the possibility of new tariffs.”

Tariffs and Trade

Tariffs are another point of focus, with Sherman predicting that they may reappear as a central theme under Trump, who has historically advocated for them.

“Tariffs have historically been inflationary, and it stands to reason they will attempt to pursue this avenue,” Sherman explains, noting that any new tariffs could drive costs upward. Despite expectations of a Federal Reserve rate cut soon, Sherman highlights recent increases in the 10-year Treasury yield as an indication of the market’s inflation expectations.

DeAndrea acknowledges that while tariffs may benefit American businesses in the long term, they could also lead to short-term inflationary pressures. “If new tariffs are imposed, they may help domestic businesses, but we’ll need to watch for any inflation spikes in the near term,” he says, adding that past tariffs did not significantly raise inflation during the previous Trump administration.

The recent election may have stirred the waters, but advisers are encouraging retirement savers to remain focused on their long-term goals and resist reacting to short-term market movements. With steady guidance and a clear view of economic fundamentals, these advisers believe that retirement plan participants can continue to build financial security, regardless of the political landscape.