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Where Do We Go From Here Now That The Election Is Over?
Wow! What a dramatic presidential race. In a huge upset, Donald Trump was elected to become the nation’s 45th President, and the Republican Party retained control of both the House and Senate. This outcome marks a significant reversal from just a few weeks ago when a Hillary Clinton presidency was highly probable, and even a Democratic sweep of Congress was possible.
While this outcome is certainly a shock to many, it is important to remember that the results are in, and we now must look to the future. The strength of a democracy is not in whether we like the outcome but, rather, in how we accept the result as the voice and will of our republic.
I want to be clear that, when I write about politics, I look through the lens of an investor. My personal views are personal. The focus of this letter is how it impacts our financial future, specifically how I think the markets will react.
With that said, it was good to see the initial reaction, in which the DOW futures were down 800 points (source: ABC News), ended up being an over-reaction. That is not to suggest we shouldn’t expect volatility going forward due to the unknown. However, typically, Presidents enter with a constrained ability to enact their agenda unilaterally. Even though we have a Republican President and Congress, these are not normal undivided government times. The two phrases that stuck with me from Tuesday night were “unchartered waters” and “unknown territory.” Trump’s issues with Speaker of the House Paul Ryan and many other republican officials creates even more divide. As a result, immediate and sweeping political changes are a process and will especially be so this year, which give markets and the American public time to digest and react.
Bottom line, this is not a time to over-react or panic in either direction. As we mentioned in an e-mail last week, Presidents come and go, but prudent and sound investment strategies are constant. Short-term, we are not getting any more or less aggressive. What we are doing is planning our moves into industries that we feel should do well and away from those that might struggle under a Republican administration. Longer-term, as Warren Buffett says, “successful investing takes time, discipline and patience.”
Separating political views and emotions from investment decisions is difficult. Whether this election result was your favored outcome or not, what we have learned over the years is that, although Presidents can set an overall tone for the markets, over the long term, it is the underlying fundamentals of the economy and the strength of corporate profits that matter more.