Like many Americans, I understand voting for our leaders is a privilege. Like many Americans, I cannot wait for this election to be over. The rhetoric, nastiness, and the entire election has taken over cable news. Half of my clients want me to put their accumulation in gold if Donald Trump wins and the other half want me to place their accumulation in money market if Hillary Clinton wins. I have no doubt, there will be a short-term knee jerk reaction by the markets one way or the other after the election. After all, this election has been like no other in recent history. Over time, the markets will come back to the fundamentals. What does this mean? You must focus on what you can control with your portfolio and achieving your goals. This is not easy to do with the passion and emotion defined by politics and the headwinds through the end of the year.
There was no surprise when Janet Yellen and the Federal Reserve announced after the early November FOMC meeting they were going to keep the fed funds rate unchanged. This was largely a decision not to rock the political boat 6 days before the election. All eyes now rest on the mid December meeting. Barring any surprises, a rate hike is expected. This sets the markets up to deal with the results of the election followed by the unwelcome idea of an upcoming rate hike. Given this, the fundamentals will largely be unaccounted for through the end of the year.
State of Economy
Regardless of the rhetoric of either candidate, the economy is not a “disaster”. After we get through the headwinds, there are many signs of a positive outlook for equities. Per the government’s advanced estimate, third quarter gross domestic product (GDP) grew at a 2.9% annual pace. This has been a welcomed improvement over the second quarter gain and the largest increase in two years. Add this to full employment (5.0% unemployment), increasing wage growth, and increasing housing prices – the next president has a solid foundation to lay his or her policies on.
Investing is very much like life from the perspective that you must focus on the things you can control. Volatility in the market and the economy are like death and taxes – you can’t avoid them (democrats, please insert joke here). As an investment advisor, I am often asked if the market is headed up or down or how an election might impact the economy. I express my opinions, but I am always brought back to my financial planning roots. In a sense, none of this really matters. Either Hillary Clinton or Donald Trump wins the election. What you can do is worry about what you can control:
· How much are you saving and investing?
· Is your allocation appropriate and balanced?
· Have you chosen low cost quality investments?
· How are you tracking against your financial plans or goals?
· Have you made adjustments to your portfolio regarding current administration policy?
As you navigate this economy through the end of the year, try to keep a long-term prospective and focus on what you can control. Try to eliminate the rhetoric and emotions of this election and focus on what the economic numbers are telling us. You wouldn’t know it by listening to the candidates, but the next president might be set up for an increase in the markets regardless of policies.