On January 20th, 2017, Donald J. Trump will put his hand on a Bible to take the oath of office and become the 45th President of the United States. Depending on your political persuasion, just thinking about that might make you feel giddy, nauseous, or perhaps something in between. Unfortunately, in a race that was marked more by hyperbole and nasty accusations than by a reasoned debate of the issues, it was difficult not to get caught up in the heat of the moment. When your favored candidate was called “crooked”, you took offence, just as you did when your candidate was called “Hitler”. Consequently, most of us today are more likely in the giddy or nauseous camps rather than in some middle ground. Emotions are running high.
The purpose of this communication is not to try to talk you down off the ledge if that’s where you’re at. You’re entitled to your feelings. Likewise, if you’re in the other camp, enjoy the euphoria. We’re not going to rain on your parade. All of you are feeling the way you feel for a variety of legitimate reasons. They’re none of our business. However, your financial well-being is our business, so please allow us to offer a little advice.
Before yesterday’s election, most polls had Clinton ahead of Trump in the so-called battle ground states, including Ohio, North Carolina, and Florida. Around 5:00 yesterday afternoon, some exit polling data was leaked that seemed to confirm those pre-election polls. Then, when the polls closed and the actual results started coming in, a different picture began to emerge. First Ohio, then North Carolina, and finally Florida were all placed in the RED column and suddenly a Clinton victory was not such a sure thing. As the night progressed…well, you know the rest.
Meanwhile, investors around the world were paying attention. At 9:00 p.m. EST, the markets in Asia had just begun their 6-hour trading day, so they were open as the election results were coming in. When it became apparent Trump was going to win, the Japanese stock market went into full panic mode and closed down over 5%. On the home front, at 3:00 a.m. this morning, the US market futures were down over 4%. (Futures are a prediction of how the next day’s trading will go.) All indications were that today was going to be a blood bath. But guess what. It didn’t happen. As this is being written (1:00 p.m.), the US markets are up by 1% today!! News events and the reaction to them can cause wild emotion-driven swings in the markets. Our advice is to ignore them, because in the long run, they don’t matter. They’re just noise - even presidential elections.
Also, remember what we wrote a few weeks ago about the relationship between stock prices and the political party of the occupant of the White House? It doesn’t matter what party they’re from. For the last 150 years, the average stock market return has been the same regardless of the President’s party affiliation. The bottom line is that the President has very little control over stock prices and the economy. Unfortunately, when things go poorly, he gets the blame. But, when things go well, he gets the credit. And in both cases, it’s largely undeserved.
So, another presidential election is in the books. Rejoice if you will, and mourn if you must. But don’t let your feelings in either direction determine your investment strategy. Investment choices based on emotions don’t usually turn out well.
Finally, remember, the sun came up today just like it did the day before, and we’re betting it will come up again tomorrow and again the day after that. Do what you can to enjoy it.