Election Results – And Going Forward

First, I take back everything I have ever said about meteorologists always being wrong.  Last night’s result was not what I expected.

So now what?

Campaigning focuses on addressing the base of the party, governing requires addressing the needs of all America.  In most campaigns, the candidates make ambitious and sometimes improbable promises.  This election took that to a new level. The winner needs to move from campaigning to governing, a pivot not easily done.  In this case that applies not only President-elect Trump but also the Republicans in Congress.  While Trump won the election via the Electoral College system, he actually lost the popular vote. We are a divided country.  His biggest challenge will be trying to heal the wounds the campaign caused and try to re-unite the country.

From my perspective, the main question is which Trump do we get – the pro-growth or the anti-trade Trump.  If he focuses on some of his positive campaign promises, like pro-growth policies such as tax reform, infrastructure spending, and less regulation, this will be positive for the country, for business, and therefore good for equity investments in general.  If he focuses on some of the more divisive promises like tearing up trade agreements and building a wall,  then we likely stay divided as a people with negative ramifications for the economy and financial markets.

Because the election result was not anticipated by the financial market there is likely going to be a period of increased volatility due to the uncertainty of what a Trump administration will focus on. I also think we will see increasing federal deficits and rising interest rates going forward.

However, the financial markets are all about making money and, at the end of the day, don’t really care who our elected officials are.  The markets will figure out a way to make money under any administration. As proof see this chart of S&P 500 returns.  Yes there were a couple of really rough years during 2000-2010 decade but the general trend across the last 5 administrations is higher.

election_chart

Your current investments are adequately diversified to withstand any short-term volatility.  My primary emphasis is on determining which sectors/industries will benefit or suffer going forward.  As example, energy and financials will likely benefit from less regulation.  Construction and defense contractors will likely benefit from infrastructure & military spending. Healthcare will likely suffer if they repeal the Affordable Care Act.  Companies that operate globally, such as technology, will likely suffer if trade deals are modified or rescinded.

So for right now we will maintain our positions and follow the plan we have in place.  If and/or when any adjustments become necessary I will let you know.

Feel free to call me with any questions.

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