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Pension Funds Should Beware the Trump Bump

Monday, March 20, 2017 12:49
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While it’s too early to tell what the Trump Administration’s full impact on the American economy will be, pension funds can (for now, at least) breath a little bit easier thanks to the Trump Bump’s initial effect on the stock market. These early returns are promising, but it’s unlikely they’ll be with us forever.

In this commentary, I discuss the potential effect the Trump Bump could have on pension funds, and why institutional investors should be cautious when making their decisions based on this early news. Business confidence is up and promises to increase growth and bring jobs back to the United States inspire a general sense of optimism in the market, but the current mood shouldn’t inform any major investment policy changes by pension systems.

“[T]here’s strong evidence that even if the upswing isn’t part of a bubble, it’s a temporary reaction to a presidential election. Of the past 22 elections, 14 saw an increase in the S&P 500 between election day and inauguration (two of those were during the Great Depression). Between November 9th and January 18th, the S&P rallied by 6%. This shouldn’t be confused for good news: Herbert Hoover in 1928 experienced the largest post-election bump in U.S. History.”

The Trump Bump is good for pension funds now, but governments should use caution when making investments that are supposed to last through the careers and retirements of their employees.


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