Why You Shouldn’t Rush Financial Changes After The Election
Back in 2008, we were amid the biggest financial crisis since the Great Depression. During my 27 years in business, 2008 was the most stressful because of the magnitude of the stock market’s loss.
During this time, many Wall Street elites believed that significant inflation would happen due to the amount of government stimulus that was being pumped into the financial system to stimulate the economy. This belief system had many investors moving money toward investments that performed well during high inflationary times. Unfortunately, these investors were let down as high inflation never ensued.
This is one of many examples we’ve seen where the public’s belief of what will happen in the economy and what actually happened is different. I think now is an excellent time to revisit using instincts to drive investment decisions because many investors are making bets on investments they believe will do well because of the election results.
Is Now The Time To Place Your Favorite Trump Trades?
To determine if now is the time to start making Trump trades, it is worth discussing some historical political observations. If you have ever followed politics, you are acutely aware of how the promises politicians make while on the campaign trail are typically less than what they can deliver. I believe this time will be no different for the Trump administration for a few reasons. The first reason is that Trump will not have a Supermajority in either the House or the Senate. Furthermore, there is a group of Republicans who are moderate and do not always see eye to eye with Trump. These two variables will put the brakes on achieving some of the campaign’s more ambitious goals during his term.
The degree of unification amongst Republicans will ultimately dictate how aggressive Trump can be, which will ultimately dictate which way the economic and investment pendulum swings. Presently, we can only speculate on how unified the GOP caucus might be. My guess is we will end up having a watered-down version of what was discussed on the campaign trail. I also believe that this watered-down version of deliverables has already been priced into the stock market based on what current investors believe will happen. In other words, all known information has likely been baked into the stock and bond markets. In the future, investors will need to outsmart what Wall Street already believes will happen, which has historically been a very difficult endeavor.
Historically, Bernicke Wealth Management’s most productive investment changes have gone the opposite of the message being portrayed in the media. This has been accomplished by emphasizing investments that are temporarily unpopular and deemphasizing areas of the investment markets that are popular. Intuitively, this is the opposite of how many people invest.
What To Do Now: Stay Steady
As you know, we strategize about investments daily but only make changes periodically. From 2021 through 2023, we made several changes. This year, we made only a few changes, preferring a hold strategy. In the future, we will continue to look for sectors of the market with promising valuations based on expectations about how economic events will affect things moving forward.
We will continue to maintain broad asset allocations that will be influenced by our strongest convictions without going all in on any one idea no matter how strong the convictions are.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
