Preparing for Market Volatility Amid Election Uncertainty: The IPS Strategic Capital Approach
- Dominick Paoloni
- October 29, 2024
- 9:55 am
With the election just a week away, many clients are understandably concerned about potential market reactions, especially if the election outcome is contested, as it was in 2000. In that election, the results between Bush and Gore remained undecided for over a month, ultimately requiring a Supreme Court decision in mid-December. During that period, the markets saw nearly a 9% drop before stabilizing, reflecting the uncertainty and tension across the nation.
A similar scenario could unfold in the current political climate. Should the Supreme Court, leaning conservative, intervene, it might declare a winner under contested circumstances, which could spark further uncertainty if congressional certification becomes disputed with Harris as the vice-president now in charge of certification, as Pence was in 2020 . Given the current political divisions, tensions could escalate, leading to unprecedented volatility that may shake investor confidence. It’s possible that the market response could be even more severe than in 2000, with potential losses doubling.
The IPS Capital Approach to Protecting Portfolios
At IPS Strategic Capital, we believe hedging is the cornerstone of sound risk management and the answer to market uncertainty. Just as we insure our homes, cars, and health, our investments deserve protection too. As Warren Buffett famously noted, “Diversification is protection against ignorance,” implying that true protection means going beyond traditional diversification.
Unlike conventional annuities, which may have served a purpose decades ago but now often line advisors’ pockets at the expense of clients’ returns, our strategies focus on modern, dynamic risk management through hedging. All IPS strategies are designed to manage risk effectively. Our Absolute Return strategy, for instance, has delivered over 20% net returns over the past year, while our custom structures offer zero downside risk with the potential to capture 80-90% of market upside.
By hedging our portfolios, we proactively define and manage tomorrow’s risk today. This unique approach allows us to remain confident in market exposure without fear of unforeseen events, such as election uncertainty, that could derail an unprotected portfolio. Nassim Taleb, author of The Black Swan, put it best: “If you’re not hedged, you shouldn’t be invested. And if you don’t know how to hedge, find someone who does.” At IPS Strategic Capital, we are one of the few firms nationwide truly skilled in hedging, providing the expertise to protect your wealth in any market climate.
