After a wild ride overnight in the stock market (down -5% at one point), I was ready at the market open to take advantage of the pull back, only to see the stock market bounce back to where it ended the day before. Now things have turned positive and the market ended today up 1+%.
Here’s how we’re feeling in our office today:
1. Not that bad – While the market was signaling chaos last night, we woke up to calm this morning. The contested election investors were nervous about seemed to evaporate this morning as we hear speeches of unity and a smooth transition of power.
Regardless of the emotional swings in the stock market, our country has a track record of changing power 45 times over the last 240 years, and we believe we’ll successfully navigate this change once again.
Trump’s policies may be a benefit to the economy through: a revision of the tax code, business investment, and infrastructure spending. However, we’re curious to know where the cuts in government spending will come to pay for this.
2. Not that great – The stock market ended today close to all time highs and we think that’s too optimistic given we don’t have many details of how this administration will lead.
The areas driving today’s rally were banks and health care stocks because of possible deregulation.
Whether you think the Trump agenda will be for the better or worse, any major changes coming our way will likely be tempered by a political process that’s meant to slow down any sweeping change.
Trump’s policies could disrupt the economy by: swinging to protectionism, removing Janet Yellen as Fed Chair, and implementing the aggressive immigration policies he’s talked about. Many are hopeful he will moderate his positions in these areas.
You should know our investment process still remains intact. We buy what Morningstar believes are solid companies not based on the ever-changing political landscape, but on the strength of the dividend and/or the balance sheet of the company.
As we learn about this new administration and the market reacts to the details, we will continue to look to purchase these companies at a discount to fair value in each of our accounts.
Thanks for reading and please contact us if you have any questions,
-Tim Porter, CFP®