Americans hold off on major purchases over election uncertainty
It's called the disjunction effect, according to Wells Fargo
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When people are faced with uncertainty, they find it harder to make decisions. It's called the "disjunction effect" and financial experts say this applies to the election.
Interesting of note is that people feel inclined to hold off even if they make the same decision, regardless of what happens next.
"As a consequence, they may continue with the status quo, or a ‘do nothing different’ mentality until the uncertainty is resolved," Michael Liersch, head of advice and planning at Wells Fargo, told FOX Business.
The election is a prime example, given that it's a moment of extreme uncertainty, he noted.
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"In line with research around the disjunction effect, people may delay major decisions - for example, a decision to buy or sell something - until they know the results of the election even if they will ultimately move forward regardless of which candidate wins," Liersch said. "The bottom line: people may simply feel the need to know the result in order to take action."
A house for sale in the Capitol Hill neighborhood of Washington, DC, US, on Tuesday, July 30, 2024. (Photographer: Tierney L. Cross/Bloomberg via Getty Images / Getty Images)
The issue is "uncertainty in and of itself can cause decision paralysis," he continued.
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Liersch explained that making decisions when knowing future outcomes feels easier.
An AutoNation dealership in Las Vegas, Nevada, US, on Tuesday, July 18, 2023. AutoNation Inc. is scheduled to release earnings figures on July 21. Photographer: Bridget Bennett/Bloomberg via Getty Images (Bridget Bennett/Bloomberg via Getty Images / Getty Images)
While a fear of the unknown can play a part in this thought process, Liersch said the "biggest driver is truly the difficulty in mapping out the justification for the decision without knowing the outcome," he continued.
In order to overcome this, he suggested sitting down with a trusted spouse, partner, family member, friend or professional and focus on your goals.
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Republican presidential nominee, former U.S. President Donald Trump and Democratic presidential nominee, U.S. Vice President Kamala Harris take part in a presidential debate hosted by ABC in Philadelphia, Pennsylvania, U.S., September 10, 2024 in a c (REUTERS/Brian Snyder / Reuters)
"What is it that the decision will help you accomplish? And run the scenarios. If X candidate won, what decision should you make?" Liersch said. "If Y candidate won, what decision would you make? In that way, you can "stress test" whether the outcome really would impact your personal financial goals, and the decisions involved in reaching them."