As the polls closed Tuesday evening across America, it signalled a momentous moment: we can finally stop talking about this damn election!
Now, however, we must sift through the debris. Will the outcome be good or bad for your financial health?
Financial markets finished voting long before citizens did. They picked Hillary. As a result, stock markets continued a strong two-day advance. The Mexican peso (a barometer of anti-Trumpism) surged. The VIX fear index slumped. Gold tanked. Bonds started to sell off. You’d think that after Brexit, traders would have learned their lesson – when they were caught massively offside by an unexpected political outcome. But the sentiment was so strong on Monday and Tuesday that The Donald was toast, risk was embraced. Almost groped.
Will the Wall Streeters be spanked again when trading opens Wednesday morning? Doubtful. But anything can happen.
Meanwhile one thing is clear: amateur investors and incompetent advisors who try to time markets and rushed into cash over the last few months, afraid of November 8th, have already lost. The Dow (for example) gained almost 450 points in two trading days this week. Bay Street has surged more than 12% this year. Balanced and diversified portfolios have plodded happily higher even since shrugging off their oily funk last winter. The US election has been a gong show and a noisy distraction, but anyone who mistook it being truly meaningful needs a slap on the head.
Whomever the prez, corporate profits, hiring, GDP growth, car sales, manufacturing output or real estate deals won’t materially change. Markets may roil a bit more before and after an election, but the economy rolls along. Long-term investors are fools if they listen to ‘money managers’ who think they can add value by flipping securities based on the latest CNN report. In short, market timing doesn’t work with financial assets.
I told all this to a guy panicked to sell a million dollars’ worth of ETFs two weeks ago. “I can’t take it,” he said. “I don’t care about long term. Put me into cash.” The decision was 100% emotional and zero per cent logical. Because fear’s the greatest motivator, he needlessly triggered capital gains taxes, then watched from the sidelines as all the great stuff he’d dumped swelled in value. Likely, in a few weeks, he’ll buy in again, at higher prices. Another genius.
While this election’s hugely entertaining, especially in our testo-soaked comment section, it won’t change your life.
So, hug your dog (or a child, if you’re lacking) and reflect on what matters. Not this.