What’s happening and what will happen with the markets in the wake of Donald Trump’s victory as the 45th President of the United States?
While the result was indeed a surprise to most, there is no panic necessary. We are a country governed by laws passed by two houses of Congress as well as the President. While some may agree or disagree with a particular brand of politics, nothing in the way of policy decisions is going to happen immediately.
In fact, while the initial market reaction to the news was significantly negative (overnight futures were down ~ 5% at one point), the open this morning has recovered as significantly (up a bit as of this writing).
What we will see over the next few weeks/months is continued volatility (which is normal) which will provide good entry points for those holding cash. In the short-term, the volatility, while unsettling, may actually give our fund managers opportunities to deploy cash and take advantage of dislocations to further enhance portfolio returns.
As usual, we have been closely following the economic environment. The facts are that corporate balance sheets are in very good shape and corporate earnings are rising. Consumer finances show that household debt service ratios are at historic lows and household net worth at historic highs. As a result, consumer sentiment has been and should continue to increase and bolster the already positive consumer consumption rate (nearly 69% of our economy).
We encourage you not to make any knee-jerk reactions based on the outcome of this election. Our investment strategy has always been one driven by asset allocation with a view to the long-term. As we have seen in the past, the shocks to our systems typically create temporary dislocations in the market (BREXIT, the Taper-tantrum, LTCM meltdown, etc.) Cooler minds will prevail which is why we firmly believe in our asset allocation approach. That is not to say we will not act to fine-tune our strategy over the next few weeks as we assess the changes in government policies and initiatives resulting from the election.
To summarize, what we do now is stay the course.
Please feel free to reach out to any of us on your wealth management team if you have any questions or concerns, but know that we are diligently watching/reviewing the situation.