Election Season Is Heating Up. Is Your Portfolio Ready?
If you live in a state with a contested Congressional race, you’ve probably been hearing nonstop political commercials. They are hard to ignore.
Whichever party ends up controlling Congress, the outcome could shape the policy environment for the next two years. Continued Republican control could mean more continuity with the policies we see today. Or, a shift to divided government could bring legislative gridlock, Congressional oversight, and more political uncertainty. Let’s look at a couple of big issues and what the elections could mean for gold.
The National Debt and Safe-Haven Demand
The U.S. national debt recently crossed $40 trillion, a new record high. This has shined a spotlight on our country’s long-term fiscal health. For some investors, it raises questions about our government’s fiscal health, the strength of the U.S. dollar and its reserve currency status, and ultimately the future stability of our stock and bond markets.
For centuries, gold has towered above other assets as a safe-haven investment that can protect against these and many other concerns. Gold is no one’s liability, it can’t be printed, and it doesn’t depend on any government’s promise to pay.
Why this is positive for gold:
If Republicans keep control of Congress, we likely get more of the same policy with little focus on taming the national debt. If we have a divided government, gridlock is a likely outcome. Neither scenario is likely to usher in a major debt reduction proposal or action. Bottom line? Both election outcomes are bullish for gold.
The U.S.-Iran War and Inflation
Every time we fill up your car at the gas station, it’s a reminder about the U.S. war with Iran. If the conflict with Iran continues, inflation could stay elevated or even accelerate.
Congress has tried to rein in the Iran conflict, but so far it hasn’t been successful. The House of Representatives has passed war powers resolutions three times, yet the Republican-led Senate recently fell one vote short. No matter, a presidential veto would likely sink anything that did pass. That means the war can continue without new congressional authorization, with no clear end in sight.
This has an impact on gold. A prolonged conflict means more government spending, stubborn inflation, and ongoing geopolitical risk. Those are the conditions that have historically sent gold higher.
Why this is positive for gold:
Geopolitical conflict reinforces gold’s role as a safe haven. When military conflict flares and uncertainty rises, investors have historically turned to gold as a store of value. The case for owning physical gold as a long-term anchor in your portfolio is strong.
Pre- and Post-Election Uncertainty
Heading into the midterm elections, local and state election officials are rehearsing for crises they’ve never faced before, according to a multi-state Reuters investigation. For example, some state officials are advising local clerks on how to respond to demands for voting machine access, or the sudden arrival of federal agents at polling places.
Right now, there are already hundreds of legal battles over how U.S. elections are conducted, including redistricting cases, disputes over voter registration, ballot access, mail voting and voter rolls.
With partisan tensions high post-election uncertainty could be high with even more court battles and questions.
Why this is positive for gold:
Election disputes tend to reinforce gold’s value as a portfolio hedge. When trust in institutions gets shaky and politics get messy, investors turn to safe-haven assets like gold that don’t rely on any government or political party.
The Bottom Line
The midterm elections may bring policy continuity or legislative gridlock. No one can say for sure. But some of the key policy issues in play, from mounting debt to geopolitical conflict to election uncertainty, all strengthen the long-term case for gold.
Gold’s appeal has never depended on one party winning or one policy passing. It’s about owning something tangible that holds and increases in value when the economy, financial markets or the world feels unpredictable.
If you’ve been thinking about adding physical gold to your portfolio, or increasing your allocation levels, now is a good time to check in with a Blanchard portfolio manager—before the election. Blanchard is here to help you build an investment plan that fits your long-term financial goals, not the news cycle.
