It happens every election cycle: generally half of our clients are disappointed with the results regardless of who wins. We’ve seen numerous elections in the past twenty years during which I advised clients about investing and planning for retirement.
When it comes to this year’s election of Donald Trump, there are a few things that are helpful to keep in mind:
The USA has the largest, most dynamic and innovative economy in the world. This reality is unlikely to change any time soon. We are fortunate to be able to live and save for our future here.
In general, the rhetoric on the campaign trail of someone trying to get elected is often different than their governing style. The U.S. government has three branches of government built on checks and balances for a reason.
A good financial advisor should stress test your portfolio. This can project what effect a 20% decline in your portfolio in the next two years may have on your ability to retire. If you are unsure of the portfolio stress test result, we would love to have a conversation with you about your financial future.
Each election cycle during my career there are those who would claim the results of that election are proof that America is irrevocably doomed. As a student of history, it appears that this is an American pastime since the founding of our country. I heard those claims when Presidents Clinton, Bush, and Obama were each elected and I suspect we will hear the same with President-Elect Trump. In that time we have had both political parties in charge, wars, recessions (including the worst recession since the Great Depression), an impeachment, scandals, and crises of every type. Yet, the S&P 500 (i.e. "the market") also experienced a cumulative return of 365% or an average annual return of 7.82% from June of 2016 to the end of October this year.. It is highly likely that investment portfolios will be higher 5, 10, 20, and 30 years from now.
The future is, by definition, impossible to accurately predict. We can use data and logical inference (see above) to make assumptions about likely outcomes. The key is to exam our assumptions every few years to see how our assumptions are tracking versus reality and make adjustments as necessary.
Finally, as I mention to all of our clients at American Portfolios Denver, part of our job as your financial advisors is to not only provide you technical expertise as mentioned above but to also help you keep your emotions and your money separate. Most would agree that emotional decisions about money rarely turn out for the best.
There is little evidence to support that Presidents from one party or the other have a significant impact on investment returns. Consequently, making wholesale changes to your investment strategy either because you fear the next four years or you embrace them from a political standpoint would not be prudent.