What Does a Trump Presidency Mean for Your Portfolio?
Remember when we closed the last quarterly market commentary with a note about expecting the unexpected, and we mentioned “if the Cubs win the World Series, anything is possible”? We didn’t know how predictive that little joke would be. The Cubs won the World Series, and Donald Trump won the 2016 election.
Leading up to the election, political media coverage overwhelmingly declared Hillary Clinton would win—but these predictions were all proven wrong. Pollsters had their worst year ever—even the final election update from data analyst Nate Silver at FiveThirtyEight showed Hillary Clinton’s chances at 71.4%.
The key word there is “chances.” This election showed the folly of trying to predict the future—just because political commentators say something will happen does not mean it will. We see this all the time in financial media as well. Financial pundits’ data and projections lead them to be so sure of future outcomes—oil rising, or financials falling for one reason or another. Yet there are so many factors at play that this is an impossible game. Market timers will tell you down to the exact number where the Dow is “supposed to” end 2016. They are all proven wrong eventually, just as the pollsters were proven so wrong in this election.
Leading up to the election, political media coverage overwhelmingly declared Hillary Clinton would win—but these predictions were all proven wrong. Pollsters had their worst year ever—even the final election update from data analyst Nate Silver at FiveThirtyEight showed Hillary Clinton’s chances at 71.4%.
The key word there is “chances.” This election showed the folly of trying to predict the future—just because political commentators say something will happen does not mean it will. We see this all the time in financial media as well. Financial pundits’ data and projections lead them to be so sure of future outcomes—oil rising, or financials falling for one reason or another. Yet there are so many factors at play that this is an impossible game. Market timers will tell you down to the exact number where the Dow is “supposed to” end 2016. They are all proven wrong eventually, just as the pollsters were proven so wrong in this election.
The Truth Comes Out When the Buyers Line Up With the Sellers
For every reason someone may have to buy a certain stock, there is a reason for someone else to sell it. Likewise, voters all had strong, opposing convictions that led them to choose one candidate or another. Every day in the markets, prices are decided when the buyers line up with the sellers. The same thing happened on Tuesday, November 8 when the votes were counted.
As an institutional investment advisor in the D.C. area, our clients have a wide range of views—and we are exposed to more impassioned political opinions in this area than most! But we take a fiduciary role for all our clients, no matter who you voted for. Our role is to be an unbiased guide on your path to mitigate financial risk and increase financial opportunity in your life, regardless of who is in office.
The markets did not react with losses as many media election experts predicted with a Trump victory—but election experts do not have a great history with market predictions. When Obama was first elected in 2008 (in the midst of the financial crisis), the Dow, S&P 500 and Nasdaq all fell around 5% despite positive media sentiment. When he was re-elected in 2012, the same thing happened to a lesser degree, with losses of about 2% for all three indexes. In this election, during the wee hours of the final results, Dow Jones futures were off over 800 points! Yet as of today’s close, the Dow is near a record high, up 1.4% for the day.
It just goes to show you that markets and media don’t always mix.
As an institutional investment advisor in the D.C. area, our clients have a wide range of views—and we are exposed to more impassioned political opinions in this area than most! But we take a fiduciary role for all our clients, no matter who you voted for. Our role is to be an unbiased guide on your path to mitigate financial risk and increase financial opportunity in your life, regardless of who is in office.
The markets did not react with losses as many media election experts predicted with a Trump victory—but election experts do not have a great history with market predictions. When Obama was first elected in 2008 (in the midst of the financial crisis), the Dow, S&P 500 and Nasdaq all fell around 5% despite positive media sentiment. When he was re-elected in 2012, the same thing happened to a lesser degree, with losses of about 2% for all three indexes. In this election, during the wee hours of the final results, Dow Jones futures were off over 800 points! Yet as of today’s close, the Dow is near a record high, up 1.4% for the day.
It just goes to show you that markets and media don’t always mix.
Democrat or Republican—Long-Term Average Annual Returns Aren’t Much Different
The great news is that research suggests whomever is in the White House doesn’t have much impact on your investments at all. Average annual returns are similar whether a Democrat or a Republican is in the White House—even if the opposite party takes the majority in Congress. Average annual returns for equities were slightly higher when one party took the White House and Congress, but this is not a cause-and-effect relationship.
*Average annualized returns for the 3,000 largest U.S. stocks 1960-2015. Source: FMR Co.
Your financial goals and the future success of your family’s financial future should not be swayed based on an election. Arguably, they can be aided or diverted temporarily, but you must stay steadfast to your dreams for your own future!
Also keep in mind that the impact of Trump’s policies will not be fully known for the first 100 days or so, once he has made some key appointments. In the upcoming months, markets may be volatile during the transition in power, the presidential appointments and the Fed’s decision on rates. Longer-term, upcoming policies designed to reduce regulations and lower taxes on individuals and businesses tend to support market growth, provided they can be accomplished without too much inflation.
*Average annualized returns for the 3,000 largest U.S. stocks 1960-2015. Source: FMR Co.
Your financial goals and the future success of your family’s financial future should not be swayed based on an election. Arguably, they can be aided or diverted temporarily, but you must stay steadfast to your dreams for your own future!
Also keep in mind that the impact of Trump’s policies will not be fully known for the first 100 days or so, once he has made some key appointments. In the upcoming months, markets may be volatile during the transition in power, the presidential appointments and the Fed’s decision on rates. Longer-term, upcoming policies designed to reduce regulations and lower taxes on individuals and businesses tend to support market growth, provided they can be accomplished without too much inflation.
Looking Forward to Opportunity
The year began with a substantial correction, we had a surprise Brexit vote in the middle of the year and now the year is closing with this Presidential election and a coming Fed meeting. While we could never have predicted the outcomes of these events beforehand, we did anticipate that 2016 could bring volatility, so we prepared accordingly. We rebalance your account regularly; every move we make within your portfolio is done in a tax-efficient way, we properly diversify for your individual needs, and we take advantage of strategic opportunities in markets when available.
All of these steps put you in a good position to benefit from a wide variety of situations. Unlike financial media pundits or political pollsters, we do not pretend to know what is going to happen in the future.
Rest assured that we monitor your portfolio to mitigate risks, while keeping our eyes wide open for investment opportunities. Thankfully, in America there is always opportunity! We encourage you to spend more time thinking about these opportunities and far less time worrying about potential losses. Investors who do this tend to have far better investment success. As your advisor, we can help you to stay focused on this path.
Please feel free to reach out to us with any questions or concerns you may have.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Halpern Financial, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Halpern Financial, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Halpern Financial, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Halpern Financial, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
All of these steps put you in a good position to benefit from a wide variety of situations. Unlike financial media pundits or political pollsters, we do not pretend to know what is going to happen in the future.
Rest assured that we monitor your portfolio to mitigate risks, while keeping our eyes wide open for investment opportunities. Thankfully, in America there is always opportunity! We encourage you to spend more time thinking about these opportunities and far less time worrying about potential losses. Investors who do this tend to have far better investment success. As your advisor, we can help you to stay focused on this path.
Please feel free to reach out to us with any questions or concerns you may have.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Halpern Financial, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Halpern Financial, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Halpern Financial, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Halpern Financial, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.