The Day After the Election…
by Robert Roman
CEO, Managing Director
MGO Wealth Advisors
Over the past few weeks various publications and media outlets made a number of bold predictions on who would win along with the potential impact on markets from the outcome of the election. America watched as the election unfolded throughout the country last night only to find that everyone, including the ‘Psychic’ Scottish Goat, were wrong. Not only did Donald Trump defy odds and win, but the market reaction defied Wall Street’s prediction of its potential impact. This is what was expected:
JP Morgan: “S&P 500 should recover about 3% to 2,150 and European and emerging market stocks should rise 3 to 4%”.
Barclays: “The S&P 500 could potentially fall 11-13%”
JP Morgan: “We believe that if Trump wins, markets are likely to fall further – one should not use the Brexit template where stocks bounced quickly”.
Citi: “The tail risks of a Trump victory or a Democratic ‘sweep’ could result in a market correction in the 5% range (similar to Brexit), after which the investment community reassess the environment”.
At about midnight last night market futures tanked and briefly went negative about 800 points. At 5am this morning, market futures were down about 200 points and by the time the market opened we were nearly flat. By 12:40pm today markets hit session highs and the Dow Jones was on track to close at or above 250 points. In the past 12 hours we’ve had a major reversal with a 1,000 point market swing. Volatility was expected but an upswing overnight was not. The reality is, even the smartest people on Wall Street don’t always get it right. They guide and predict based on measures and calculations they deem to be a fit for each circumstance but the reality and the outcome historically reflect direction based on the strength in our economy. Despite the noise the media creates this holds true, and that’s that uncertainty creates volatility, volatility creates opportunity, and clarity results in stability. We experienced all 3 overnight.
The important thing for any investor regardless of what markets do is to have a plan in place. Establish goals, determine your timeline, understand your risk tolerance and implement accordingly, then check back periodically or as circumstances change in your life.
Uncertainties still lie ahead and I would encourage everyone to take this opportunity to:
- Speak with your respective Financial Advisor.
- Revisit your financial plan. If one doesn’t exist, work with your advisor to create one.
- Determine your current level of risk and make changes to adjust based on your risk assessment and asset allocation model.
- See if tactical changes are necessary due to clarity on the outcome of the election.
I will reiterate that uncertainties still lie ahead, no one can predict short to medium term market fluctuations. Understanding the level of risk you’re exposed to will allow for you to adjust and adapt to help keep you on track. Markets are much like weather, tough to predict and it’ll sometimes rain when a sunny day is forecasted, the key is to have a rain coat ready for when that happens. Find solace in your plan and know that regardless of what the weather does the sun will still rise tomorrow.
Attached you’ll find an Election Recap written by Nuveen’s Chief Equity Strategist Bob Doll. Good read! Should you have any questions please don’t hesitate to contact me >>>.