After a tumultuous and dramatic election season, the results are in. This election was certainly one for the history books. Because both polls and markets had expected a Clinton victory, the markets are reeling from the surprise outcome. Dow futures plunged 800 points overnight, but the index was up 150 points in the morning and the S&P 500 hit a one month high by mid-day on the day after the election.
Regardless of whether your preferred candidate won, you are probably curious and maybe a bit nervous about how a Trump presidency will affect the economy and your portfolio. While we can’t predict the future, here are some insights on what we expect.
There are multiple factors to take into consideration when trying to determine what will happen to markets in the coming days and months. In general, markets hate uncertainty and as a result are showing increased volatility as the world processes the Trump victory.
While no one can be sure which policies will be enacted once Trump takes office, based on his campaign promises, experts expect more business uncertainty and slowed economic growth over the next few years.
Businesses may be more cautious about hiring and making investments in the future as they wait to see what will happen in the months to come. Some experts expect the Fed to delay their forecasted December interest rate hike, which could mitigate some of the potential negative effects to the economy. Here are some additional considerations for how a Trump presidency could affect the economy:
Trump has vowed to slash taxes for top earners and corporations, which could boost consumer spending and attract more foreign companies. However, tax revenues are expected to fall $6.2 trillion over the next decade, according to the Tax Policy Center.
During the election, Trump promised to spend heavily on programs that would create jobs in construction, and steel manufacturing. He said his focus would be on transportation, water, telecom and energy. This spending could create jobs and boost consumer spending.
Economists have feared that Trump’s spending stimulus and tax cuts would increase the national debt by $5 to 10 trillion or more, according to a report by the Committee for a Responsible Federal Budget. Trump has countered that a growing economy would mitigate the deficit. Experts disagree over whether the overall results will be positive or negative.
During his campaign, Trump promised to increase tariffs on Mexican and Chinese imports, among others. This could increases prices for U.S. consumers and even trigger a breakdown in international trade, which could hurt U.S. exports.
According to USA Today, undocumented workers make up about 5% of the labor force. If Trump follows through on his immigration policies, it could make it difficult for U.S. businesses to find cheap labor and labor prices may increase.
While this election season has been volatile and many have resorted to dire predictions and extreme emotions, we expect that the markets will follow historical trends. Remember that the White House doesn’t control the markets, there are always other variables involved that play an important role in market success or failure, such as international events, oil prices, and corporate earnings. In any case, here are some recommendations for what to do during market volatility.
It pays to stay focused on the long-term. A wise investor needs to learn to ignore the “trees” and keep their eyes on the “forest,” or the historic long-term market returns. We have built your financial plan and investment strategy for the long-term, with short-term volatility in mind. While volatility can be upsetting, there’s no reason to deviate from your long-term financial plan.
We’re here to answer your questions. When the markets get turbulent, it helps to have someone that can help you remember to see the forest through the trees. An experienced financial professional can help you evaluate the markets and make decisions based on knowledge and understanding instead of media hype. If you would like to review your current investment portfolio or have questions regarding the stock market, please contact our office today.
Now may be a good time to review your other accounts. While the accounts we manage for you are well diversified, now may be a good time to review your outside accounts including 401(k)s and other assets to assess risk and determine if any action is warranted.
We hope that you feel confident in your long-term financial plan because you have chosen to partner with a financial professional that is looking out for your best interests. Your friends and family may not be so lucky and may be stressed during this market volatility.
We are never too busy to help someone you care about. We are happy to offer a free second opinion with recommendations to minimize losses to your friends, family, and coworkers. Please feel free to share this article with them or send them our contact information.
As always, your portfolio should adhere to a long-term strategy. The short-term changes that will result from the election should not impact your long-term plan. If you are worried about your investments, please contact our office. We’re happy to hear from you and discuss your concerns.