How the elections may hit your TSP fund

Friday - 11/5/2010, 10:31am EDT

Arthur Stein, Certified Financial Planner, SPC Financial

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By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

Elections affect investments, but the most recent results will mean changing your financial plans to reflect something unusual: no change.

Certified financial planner Arthur Stein told Federal News Radio he expects the Bush era tax cuts to be extended. "This means that the current low tax rates on dividends and capital gains," said Stein, "which are now a maximum of 15 percent are likely to be extended into next year. Now it's certainly not a given, but it's more likely."

Another point to keep in mind, noted Stien, is that the "12 months after midterm elections, historically, have been very good for the stock market, with way above average returns."

Factor in the action of the Federal Reserve, buying $600 billion in Treasury bonds. The efforts by the Fed, called Quantitative Easing, said Stein, will "likely to be good for stocks and bonds."

The news isn't all good, according to Stein.

But there's nothing in the election to think it's going to deal with our major problems. You know, a slow growing economy, sluggish growth, high unemployment, falling dollar, dismal housing market, large federal debt. Those are our real issues and of course it's market fundamentals that really determine what happens to the stock market in the long term. So there will be some effect from the election, more in terms of tax policy than anything else.

But TSP investors should be stout of heart, said Stein. "If historical trends continue, the next 12 months should be good."