Decision(s) 2024: Making the Right Moves in an Election-Year Economy

Well, gang … it looks like we’re officially in the endgame now. Beyond the rampant political mudslinging that dominated headlines over the last 10 months, there were actually some positive financial takeaways for those paying attention to the news.

The Federal Reserve initiated rate cuts that are projecting out through 2025, our nation’s jobs reports continue to remain healthy, and U.S. inflation has cooled substantially over the last two years, nearing the Fed’s 2% inflation target (down from a high above 9% not too long ago).

And yet, you’re probably still very much feeling the squeeze, aren’t you? Don’t worry, you’re not alone – this past September, the consumer confidence index fell 7 points from the month prior. It was the biggest one-month dip in more than three years, and the timing seems prescient with the changing of the guard.

There’s no doubt that election years bring uncertainty, as major decisions about taxes and regulations hang in the balance that will directly impact all industries – ours included. Uncertain times aren’t necessarily synonymous with bad times, though. In fact, they can force us to take inventory of our own house and pivot or change up our financial planning to ensure we come out the other side set up for success.

This year, inflation, interest rates and market volatility have proven to be the three-headed beast standing between a lot of business owners and their goals. The unpredictable nature of this beast has forced many businesses to adapt, particularly when it comes to equipment financing and leasing.

 With interest rates what they are, the decision to finance equipment purchases or wait for a dip has become even tougher with rate fluctuations. While acquiring the equipment you need when you need it is critical to remain competitive, locking in a high rate on a loan could affect your cash flow in the coming years, particularly if rates continue to trend down.

On the flip side, there is something to be said for fixed-rate loans, which provide predictability from month to month with set payments and terms, and can offer some protection against future rate increases if the winds of change do shift. Monitoring interest rate movement is prudent, because it can substantially impact your borrowing costs.

In current conditions, an equipment lease could be a savvier play as you focus on your current cash flow and operational costs. Because it’s generally recommended to have 3 to 6 months of operating expenses in liquid cash, a short-term lease could help you ride out a little bit of turbulence while providing the flexibility to upgrade to more efficient or technologically advanced (i.e., newer) equipment when the economy stabilizes.

While the federal government often introduces new tax policies after major election cycles like the one we’re currently in, there are existing deductions you can take advantage of that might make equipment acquisition appealing even now – such as section 179 of the tax code, which allows businesses to deduct the full purchase price of qualifying equipment the year it’s placed in service.

Acquiring new equipment is often a substantial investment, and navigating the complexities of leasing and financing can be challenging, but you don’t have to do this all alone. Running a business often means wearing lots of different hats, and sometimes it’s easier and more efficient to partner with a financial advisor or consultant. A trusted advisor can provide customized financial analysis, help negotiate favorable terms on equipment acquisition, talk through tax strategies and share objective advice with your best interests in mind.

Another word to the wise, don’t lose sight of your greatest asset: your people. New equipment doesn’t work without a workforce. Remember that a strong jobs market means keeping good talent is as important as ever. With the end of year in sight, it might be a good time to evaluate things like cost-of-living increases, retention strategies and quality of life adjustments for your own staff that could help maintain organizational stability in a time of instability.

Surviving an election-year economy may seem challenging, but the reality is, it’s all cyclical. Though this cycle may feel a bit different than elections past, there are market signals that inspire hope for the year – and years – ahead. But making the right moves today could make all the difference come Jan. 20, and well beyond.