Wow! That’s what I feel at the moment. On one hand, I’m glad this election cycle is over. On the other hand, I feel a sense of history. As a nation, we nominated the first woman to be President of the United States. As a nation, we elected the first non-politician / military leader to be President of the United States. And, for the first time in my adult lifetime, there was a specific voting block that showed up to influence the outcome of a Presidential election. Irrespective of political ideology, the 2016 election may end up being a turning point for our election process.
For months, we have been talking with our clients about this election and its potential impact on financial plans. Now that the process has ended, I want to provide you with my thoughts regarding implications on investment planning.
First, if your investment strategy was appropriate for your goals on November 7, your investment strategy is most likely appropriate today. For most investors, their investment time horizon is much longer than the possible duration of a one or two term President. Maintain a long term view.
Second, expect volatility in the financial markets for the near term. Until there is clarity regarding the makeup of the new administration and consensus on how the new President will govern, markets may respond by trading in and out of securities. Historically, the US equity markets have performed positively between Election Day and Inauguration Day. 1
Third, just because we have had a surprise election result doesn’t mean that our economy, financial markets and companies will fail. To the contrary, all three have exhibited an amazing resiliency to adapt to worldwide change. Stop to think, just for a moment, at all of the things that have happened in our country and the world over the past 30 years. America keeps moving forward, our economy keeps moving forward, and we keep moving forward.
Fourth, try not to pick winners and losers; let the professionals do that. You might see articles discussing industries that may do well or poorly based on the President-Elect’s platform. Remember that platform proposals may or may not be implemented - the President must work with congress to pass legislation. Further, many unrelated factors influence stock and bond prices. Generally, the economy and financial markets have more of an impact on the President’s actions than vice versa.
Fifth, separate your political ideology from your investment policy. We have a great democracy where we debate different views, accept those who feel differently and rotate political leaders. Embrace this notion as well as your own political views. Studies show that investors are better off staying in the market during all administrations as opposed to staying in the market only when a specific political party is in power. 2 History tells us that positive market returns have occurred with most combinations of political parties in the House,Senate and White House. 3
Finally, you have worked hard to achieve your goals. Never stop working toward them. Continue to focus on what you can influence: regular financial planning and monitoring, your savings rate, your annual spending, tax management and investment strategy. Don’t speculate – do invest. And, remember: to be a successful investor, you must be convicted, disciplined and patient. Following these guidelines should help you move toward a meaningful second half!
1What Happens Historically After Elections? Posted by LPLresearch
2 Bloomberg, Oppenheimer Funds. As of 12/31/2015
3LPL Mid Year Outlook 2016 The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
No strategy assures success or protects against loss.