Now that the presidential election is in the rearview mirror, it’s time to look forward and think ahead. What decisions, if any, should you consider in days and weeks that follow? By nature, personal and investment decisions are closely connected, so markets can provide some useful guidance. It’s OK to do a little personal projection. Let’s take a closer look at the post-election guideposts for investment decisions.
Congratulate yourself on not market timing
I personally haven’t talked to anyone who tried to time the market before the election results were in at 2am on Wednesday the 9th. Or maybe no one I know will admit they mistimed the market. Carl Icahn put out a press release that he left the Trump party before 2am to buy $1billion of US stocks, via futures. He’s a billionaire, so maybe he did or he didn’t. What’s most likely is that the vast majority of investors have a longer perspective than one day and were willing to accept the election outcome.
Anyone who did try to time things had a tough assignment. There was a brief six hour period early on the 9th when prices whipsawed, zigzagged and jitterbugged. Futures were way down for a few hours, but by midday on the 9th, stock prices had recovered. The price adjustments are pretty simple:
- US stocks up 6%
- US interest rates up 33% (prices down 5-15%)
- Dollar up 6-8% versus the euro and the yen
- Non-US stocks down a little
- Emerging market stocks down 6%
There were also some “funny” counter-sense moves, like newspaper stocks up 15%, after almost all the mainstream media missed the Trump victory call. For the most part these short-term shifts don’t match up with short-term market forecasts for what a Trump win would bring.
Entering news-lite time
If you have news fatigue, worry not. The seven weeks after a presidential election are typically heavy on political parlor game playing (her for Secretary of Energy?!) and light on fundamental news. That’s because the entire country shifts to giving the incoming President the benefit of the doubt and almost every American truly wants the President to succeed.
Yes, there are a few fundamental news days like the end of yet another OPEC oil cartel price-fixing meeting in Vienna on 11/30, the jobs report on 12/2, and the interest rate hike (or not) on 12/14. Consumer spending does go into high gear with the holiday season. But that’s about it. I don’t see very many important not-already-in-the-price events coming for the rest of 2016 – and Max and I watch very closely.
3 things for you to do
The three are easy to say, and mostly easy to do. First and foremost, ask yourself “there was just a big political change: Did I change?” Probably not.
Second, stay risk-constant. Market price changes may have just unbalanced your portfolio and changed your risk level. Has your risk gone up or down and how do you know? Call us if you would like a second look.
Third, get ahead by getting ready. Act now and abandon procrastination. Now is the time for that portfolio review, the time for investment cost cutting, for unnecessary tax payment reduction, for changing to a “me-based” portfolio from a “them-based” portfolio. Again, call for details if you would like an investment fitness checklist.
It’s always a good time to get better and never too late to start.
John Osbon- josbon@osboncapital.com
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