Economic Commentary – What Does The Election Mean?

We’ve all been through a bruising election season, and emotions are running high on all sides of this election’s various debates. As readers of these economic commentaries know – but it bears repeating – our only goal is to provide objective and meaningful information on the economy and investment markets, which allows our clients to make the best possible decisions regarding their investment and financial goals.

Historical Observations

In light of the depth of the concerns about what this election means, let’s start with an overview of how elections have impacted the markets in the past. Below is a chart showing the progress of the S&P 500 over the last 70+ years. That time period encapsulates both Republican and Democratic presidencies. Coincidentally, there are five broad “red” periods and five broad “blue” periods, so this is a good test of what our quintessential American changing of the guard means.

The biggest takeaway is that the economy’s broad direction remains generally upward regardless of the election cycles.

Each party’s time at the helm has seen its share of relatively calm markets, downturns, and recoveries. While it’s tempting to get into the weeds about what caused each downturn and then what caused the subsequent recovery, that conversation right now would distract from the more important lesson.

We are blessed to live in a country that has thus far, in its almost 250-year history, remained true to its democratic traditions and self-corrective mechanisms. When either party has blundered – and each one has, several times in fact over our history – the system allows the voters to discipline and correct our leadership by voting for change.

We should also pay attention to the fact made clear in the chart above that each broad “red” and “blue” period has seen a market high. Each of these market highs has eventually been followed by another market high greater than the last one.

Are there downturns, corrections, and recessions in between? Of course, and there most likely will be going forward. But this long, broad, upward trend in our markets means that we should not be concerned by the heights we achieve as if they somehow signal that a fall is inevitable.

Sometimes, market highs are immediately followed by other market highs.

Sometimes, market highs are followed by a correction, and the next recovery takes a while to develop and play out.

The point is that we will never know which pattern will play out at any point in time. This year, after the election we’ve just weathered, the only guarantee is that we will see both.

Can We Time This?

Should we try to time it? Should we try to figure out whether there will be a “down” before there’s another “up,” or whether we’re immediately going to have another “up”?

History teaches us that attempts to time the market fail because of the very slim margin for error. The chart below is representative of similar charts and graphs which have been compiled over the decades. This one looks at the period from 2003 through 2022, but other studies of other 20-year periods at other times in our country’s history have shown remarkably consistent results.

To time the market and succeed, you have to be right roughly 98% to 99.5% of the time. In other words, the error margin seems to be between 0.5% and 1.1%. How is that determined? Here’s how.

Value of $10,000 Invested in S&P 500, Jan 2003 – Dec 2022

In this chart, the green boxes show how $10,000 would have grown over these 20 years if an investor had been in the market over various periods within those 20 years. The gray boxes show the growth an investor would have missed.

Being invested in the market for all 5,040 trading days in this 20-year period would have grown $10,000 to $64,844. If an investor had tried to time the market and missed the best trading days, look what happened:

Missing the 10 best trading days means $35,136 of growth is missed.
Missing the 30 best trading days means $53,143 of growth is missed.

The orange line represents break-even; that means the investor would at least keep their $10,000.

Notice that missing just 40 of the best trading days represents a real loss of principle, and missing 60 would have been devastating.

60 trading days represent only 1.1% of the total trading days in this 20-year period.
30 days – which is barely break-even – represents 0.5%.

The margin of error for marketing timing to work is somewhere between 0.5% and 1.1% based on this study, which is the typical finding of the other studies done during different 20-year periods.

Consistency Wins

These two charts together make one of the strongest arguments we can make for being broadly and consistently invested in stocks. That doesn’t mean you should put your entire portfolio or life’s savings into stocks. There are important investment allocation issues that determine how much to invest in stocks vs. how much to invest in bonds.

However, once a proper allocation analysis has been conducted, whatever amount is allocated to stocks should be consistently and broadly maintained regardless of who occupies the White House.

Elections Are Not Policy

This commentary is not expressing any opinion about what the election results mean for the economy despite the winner’s many pronouncements and campaign promises, which we could review. Nor would we have expressed an opinion if the other candidate had one. The reason is very simple.

Pronouncements and campaign promises are not the same as policy. Even policy proposals are not the same as policy. Policy results from the negotiations between and within each of our government divisions. The White House, the Senate, and the House of Representatives must negotiate with the other divisions to pass any major policy. And even within each division, there are negotiations on what the policy should be.

As policies are developed and put forward with details that can be analyzed, we will – as we always have – review the prospects for the broad economy and the markets. And indeed, the history of our economic commentaries shows that we have tackled a wide variety of issues over our firm’s 45+ year history.

There is much to be thankful for this post-election holiday season. Once again, we are witnessing the peaceful transfer of power in one of the most powerful countries on earth. Looking over the millennia of recorded history, that is unique, and we should be grateful that this system has allowed our economy to prosper and grow. We have no doubt that there will be many future successes down the road, just as we are sure there will be interim setbacks and corrections along the way.

Investment Implications

Assuming both will occur – the long-term upward trajectory with volatile interludes along the way – allows us to design portfolios that will thrive and allow investors to achieve their financial goals and dreams. We know that downturns will occur, and so will recoveries. We plan for them without knowing exactly when they will occur. For portfolios designed this way, the best action now is to stay the course.

Executive Summary

It has been a very emotional election season, and many people remain concerned and anxious. But the reality of what this election means for our economy and markets is less dire than imagined or claimed by some. The reality is that Republicans and Democrats have traded seasons in power relatively evenly over the last 70+ years, and yet, the long-term trajectory of our economy and markets has remained remarkably consistent. By acknowledging that these patterns will repeat, even without knowing exactly when they will repeat, we can design portfolios that will thrive over the long term and help investors achieve their financial goals.

First Financial Consulting

A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) pay for qualified medical expenses. What sets HSAs apart is their triple tax advantage: contributions reduce taxable income, earnings grow tax-free, and withdrawals for eligible medical expenses aren’t taxed.

For anyone looking to reduce healthcare costs, save on taxes, and even prepare for retirement, an HSA is a powerful financial tool. Here’s why it matters:

Quick Overview

Tax Benefits: Pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical use.
Ownership: The account is yours, even if you change jobs.
No RMDs: No required minimum distributions at any age.
Investment Options: Access to numerouse investment funds and it can be used to invest for long-term growth.
Retirement Use: After 65, funds can be used for non-medical expenses (taxed as income).

Eligibility and Contributions

To qualify for an HSA, you must enroll in a High Deductible Health Plan (HDHP). For 2025, that means a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage. Being enrolled in other coverage, like Medicare, will disqualify you.

Contributions can come from you, your employer, or even family members, and must be cash (not investments or property).

For Health Savings Account, in 2025, individuals can contribute up to $4,300 and families up to $8,550, with an additional $1,000 catch-up contribution allowed for those 55 and older.

Coverage Type	2024 Limit	2025 Limit	Increase
Individual	$4,150	$4,300	$150
Family	$8,300	$8,550	$250
Catch-Up Contribution (Age 55+)	$1,000	$1,000	No change

Health Savings Account Benefits

HSAs offer unmatched tax perks:

Pre-tax contributions lower your taxable income.
Tax-free growth means the money you invest in your HSA can grow without being taxed each year – so your savings build up faster.
Tax-free withdrawals for qualified medical expenses keep more money in your pocket.

Compared to other accounts like 401(k)s and IRAs, HSAs have no required minimum distributions (RMDs), making them ideal for long-term wealth building. The account is also fully portable – you own it outright even if you change jobs or insurance plans.

Managing Your Account

Maximizing an HSA starts with selecting the right provider – look for low fees, robust investment options, and user-friendly interfaces. Many HSA administrators offer the ability to invest your balance in mutual funds, ETFs, or other vehicles.

Keep thorough records of your contributions, distributions, and receipts. This documentation ensures IRS compliance and preserves your tax advantages. Consider using your HSA debit card for convenience, but always retain proof of qualified expenses.

Using Your HSA

HSA funds can be used for a broad range of medical expenses, including:

Keeping receipts is crucial, especially if you choose to pay out-of-pocket and reimburse yourself later – a strategy that allows your HSA investments to grow tax-free for longer.

Investment Options

HSAs aren’t just for short-term spending – they can serve as investment accounts for long-term financial planning. Investment strategies vary based on your goals:

Investment Strategy	Cash Reserve	Investment Allocation	Best For
Conservative	100% in cash	None	Immediate medical needs
Balanced	Amount equal to annual deductible	30% stocks, 70% bonds	Balancing current and future needs
Growth-Focused	10% in cash	50% stocks, 40% bonds	Long-term retirement planning

Experts recommend keeping at least enough cash to cover your deductible and investing the rest according to your risk tolerance.

What's your risk tolerance? Your tolerance to risk will have a big impact on the types of investments you choose. However, not many people know what their risk tolerance is. Discover your risk tolerance by taking our Risk Tolerance Questionnaire.

Retirement Planning

When used correctly, HSAs can be a strategic retirement planning vehicle. After age 65, funds can be used for non-medical expenses without penalty (though they are taxed as ordinary income). That flexibility makes HSAs a powerful complement to 401(k)s and IRAs.

Consider these retirement-focused strategies:

Cover current healthcare costs out-of-pocket to let your HSA grow.
Max out contributions after funding your 401(k) or IRA.
Use your HSA to pay for Medicare premiums, long-term care, and other out-of-pocket medical costs.

Tax Implications

The tax benefits of HSAs are a cornerstone of their appeal:

Contributions reduce your taxable income.
Growth isn’t taxed as long as it stays in the account.
Distributions for qualified expenses are also tax-free.

However, distributions for non-qualified expenses before age 65 are subject to income tax plus a 20% penalty. After 65, only ordinary income tax applies.

Work with a tax advisor to stay within IRS guidelines and maximize your savings for the best results.

Comparing a Health Savings Account to Other Accounts

HSAs outperform many similar financial vehicles in flexibility and tax efficiency. Here’s how Health Savings Accounts compare to other financial accounts:

Feature	HSA	FSA	401(k)	IRA
Triple Tax Advantage	✅	❌	❌	❌
Withdrawals for Qualified Medical Expenses Are Tax-Free	✅	✅	❌	❌
Funds Roll Over Each Year	✅	❌	✅	✅
Account Is Yours to Keep	✅	❌	✅	✅
No Required Minimum Distributions (RMDs)	✅	❌	❌	❌

Disclaimer: The information presented in this table is for general informational purposes only and is used as a broad comparison tool. Contribution limits, tax rules, and eligibility requirements are subject to change depending on the intricacies of each account type.

Unlike Flexible Spending Accounts (FSAs), HSA funds roll over yearly and belong to you regardless of employment. And unlike 401(k)s or IRAs, you can use HSA funds anytime for qualified medical expenses with no penalties.

Family and Estate Planning

HSAs can be used for qualified medical expenses for your spouse and dependents – even if your HDHP doesn’t cover them. Upon your death, the HSA transfers to a named beneficiary. If that’s your spouse, it remains an HSA; for others, it’s treated as taxable income.

To maximize long-term value:

Set beneficiaries carefully.
Use the account to cover family healthcare expenses and reduce taxable withdrawals.
Include your HSA in your estate planning discussions.

Portability and Flexibility

An HSA travels with you. Change jobs, move states, switch health plans – your HSA stays intact. You can even open multiple HSAs for different strategies (e.g., short-term spending vs. long-term investing).

This flexibility allows you to build a healthcare safety net that evolves with your needs.

Health Care Integration

HSAs are designed to complement HDHPs by reducing your net out-of-pocket costs. They provide a safety buffer against large medical expenses and a way to pay for ongoing healthcare needs like:

Preventive care
Specialist visits
Prescriptions
Mental health services

When used strategically, HSAs help make high-deductible plans more manageable and affordable.

Is an HSA Right for You?

A Health Savings Account is more than just a savings tool – it’s a cornerstone of a smart financial and retirement strategy. With triple tax advantages, investment potential, and unmatched flexibility, HSAs can significantly reduce healthcare costs and support long-term financial goals.

To get the most out of your HSA:

Confirm HDHP eligibility and stay within contribution limits.
Invest your surplus wisely for long-term growth.
Keep meticulous records to protect your tax benefits.
Consider working with a financial advisor to optimize your strategy.

Whether you’re saving for next year’s doctor visits or planning decades in advance for retirement, an HSA belongs in your financial toolkit.

Schedule Your Complimentary Consultation

Meet Greg Welborn

Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.

Meet Greg Welborn

Greg Welborn is a Principal at First Financial Consulting. He has more than 35 years’ experience in providing 100% objective advice, always focusing on the client’s best interests.

FAQ | Health Savings Account

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged savings account available to individuals who are enrolled in a High-Deductible Health Plan (HDHP). It allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. Funds in an HSA can be used to cover deductibles, copayments, prescriptions, dental and vision care, and more - all while reducing your taxable income. The account is owned by you, not your employer, and the money rolls over year to year.

Who is eligible to open an HSA?

To qualify for an HSA, you must meet the following criteria:

Be enrolled in a qualified High-Deductible Health Plan (HDHP).
Not be enrolled in any other health insurance coverage (like a spouse’s plan or Medicare).
Not be claimed as a dependent on someone else’s tax return.

For 2025, an HDHP must have a minimum deductible of $1,650 for self-only coverage or $3,300 for family coverage, along with a maximum out-of-pocket limit of $8,300 (individual) or $16,600 (family).

How much can I contribute to an HSA?

The IRS sets annual contribution limits for HSAs, which adjust for inflation. For 2025, individuals can contribute up to $4,300 and families up to $8,550. If you're 55 or older, you can contribute an additional $1,000 as a "catch-up" contribution. These contributions can come from you, your employer, or both combined, but they cannot exceed the annual limit.

What can I use HSA funds for?

HSA funds can be used to pay for a wide range of qualified medical expenses, including doctor visits, prescriptions, vision and dental care, and even some over-the-counter medications. If you use the funds for non-qualified expenses before age 65, you'll pay regular income tax plus a 20% penalty. After age 65, you can use the money for any purpose without a penalty - though non-medical expenses will still be taxed as income.

Can I invest the money in my HSA?

Yes, many HSA providers allow you to invest your HSA funds once your balance reaches a certain threshold, often around $1,000 or $2,000. You can invest in mutual funds, ETFs, and other securities. This gives your HSA the potential to grow significantly over time, especially if you don’t need to tap into it for short-term medical costs.

What happens to my HSA if I change jobs or health insurance?

Your HSA is yours to keep, no matter where you work or what health insurance you have in the future. It's a portable account, meaning you can continue using the funds for qualified medical expenses even if you're no longer enrolled in an HDHP. However, you can only contribute to the HSA while you're actively covered by a qualifying HDHP.

Can I use HSA funds for non-medical expenses?

Yes, you can use your health savings account for non-medical expenses. However, there are conditions you must meet.

If you're under age 65, using HSA funds for non-qualified expenses will result in income tax plus a 20% penalty.

If you're 65 or older, you can withdraw funds for any purpose without penalty - though non-medical expenses are still taxed as regular income (similar to a traditional IRA).

This makes the HSA a potential secondary retirement account for those who stay healthy and don’t use all their medical savings.