What do we expect from the new U.S. President?
As always, anytime there is an unexpected outcome in political elections, financial markets don’t like the uncertainty. This was evident last night when the future’s markets pointed to fairly significant declines when global markets were set to open for business this morning (1).
During the election campaign, President Elect Donald Trump spoke tirelessly about certain divisive issues, such as:
• Trade Protectionism
• Energy Reform
• Tax Reform
• Health Care Reform
• Immigration/Illegal Immigration Reform
Despite these issues, and many more, we know from history that political promises have three typical outcomes:
1. Promise can be pursued and fulfilled with new legislation passed.
2. Promise can be ignored and no action taken.
3. Promise can be pursued and not supported by the greater political establishment leading to no action taken.
In two out of three cases, campaign promises never reach the finish line, whether the proposed legislation is considered good or bad. And remember, there are checks and balances within the U.S. political system in order to prevent the abuse of power by any individual or group, including the President.
In my 27 years as a financial advisor, I have seen many financial shockwaves. Not all of them have been political in nature. However, I have learned that in each case, when markets experience short term turmoil we need to remember the following basic principles:
• Investment returns are driven by company specific fundamentals and valuations.
• Within a diversified portfolio, country specific allocations should be perceived as a strategic allocation, not a short term tactical trade.
• Short-term financial market sell-offs tend to be a reflection of the emotional attitudes of our society and are oftentimes not reflective
of the health of the economy. However, long-term fundamentals will bear out the truth over and over again.
We encourage all investors to ensure you feel you have the correct asset allocation and proper diversification to carry out your financial/retirement plans. If you need to re-visit this point, make sure you consult with a qualified Financial professional.
One final comment; Warren Buffet always said “Be fearful when others are greedy, and be greedy when others are fearful!”
With the uncertainty leading into this Presidential Election, many fund managers worked tirelessly to readily position themselves to continually uncover mispriced opportunities that may present themselves during this emotional time. I would suggest that as individual investors, we may wish to consider a market sell-off as a good time to add new investment dollars to our accounts.
Authored by Stephen Musial, Senior Partner & Certified Financial Planner
The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including without limitation, financial, legal, accounting or tax advice.