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There continues to be uncertainty around what will happen in the upcoming election, and uncertainty over presidential policies may continue into early next year — so for now the best advice is for advisors and their clients to make plans based on financial goals, not who’s in the White House, according to Wells Fargo analysts.

But one big policy issue that hinges on election results is taxes, they said Monday during a Wells Fargo Wealth & Investment Management client call.

Election Predictions

Even if there is a Democratic sweep in the elections, investors should not expect huge tax increases soon, according to Paul Christopher, head of global market strategy for Wells Fargo Investment Institute. Both parties will likely be focused initially on improving the economy, he says.

For now, it seems likely the Democrats will retain control of the House, he also said. And he predicted Senate control will go to whichever party wins the White House.

“Single-party control by the Democrats is the more likely of the two scenarios, but we do not foreclose the possibility of a Trump win and control of the Senate [staying] with the Republicans,” he said.

Tax Impact

“We do expect that taxes will rise if we have single-party control under the Democrats,” Christopher said, adding: “Delay, dilution and defeat are typical in tax reform [and] we should expect that next year” if the Democrats take control and push for tax changes.

Democratic tax proposals may include restoring the 39.6% individual income tax rate on incomes over $400,000 from 37% (as Joe Biden has proposed) or taxing capital gains as ordinary income, he said.

More Similarities Than Many Think

It is also important to note that despite the large tax and other policy differences between the two political parties, the ongoing pandemic and economic situation “creates trends that no president or party can ignore, and these trends also make for more similarities between the two parties than many people acknowledge,” Christopher said.

For example, “in order to support the economy, both parties favor expensive government spending, principally on health care and infrastructure spending,” he pointed out. And that creates “investment opportunities,” he noted, adding both parties also “want to renew U.S. manufacturing” and “get tough with China.”

Advisors and investors should, therefore, align their portfolios with these factors if they want to make adjustments, he suggested.

Stay Calm and Plan

However, it is also “important to remember the elections are just the beginning” of the candidates’ efforts to transform their campaign promises into policies and laws, Christopher said.

“It typically takes several months to figure out the balance of power — moderates versus progressives versus the other party,” he pointed out, adding it will matter a lot, for instance, if the Democrats sweep but Republicans have a significant minority and Democrats have just a slim majority in the Senate. It will also matter significantly who is selected to serve in the cabinet of the president and as his senior staffers who will work with Congress to enact policies, he noted.

“So, there’s a lot still to be determined between now and, let’s say, March,” he said, noting “our best advice in terms of those policy differences is be aware of them and be prepared to act” — but don’t make any major moves until the balance of power and appointments to the president’s staff become clear.

Advisors and investors need to first decide what they want their money to do over time, he said.

What to Factor Into the Plan

Also important to factor into investment plans are trends beyond the “political noise,” including economic recovery, increased adoption of digital technology by businesses and consumers, and more challenges that are expected for global trade, Christopher noted.

Cash should play a role in the financial plan in two potential ways, he said: first, to hold onto some cash as an emergency fund, apart from cash in one’s portfolio, for 6-12 months to cover expenses.

Cash should also be used as part of a portfolio rebalancing: Advisors can reduce positions when they go above certain price targets and then take cash from those reductions, “put it on the sidelines,” and then slowly put that cash back into investments that are looking attractive at that point, he said.

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