Trump and Your Investment Portfolio

If you were watching the results on election night, you saw the financial markets react. In the wee small hours of November 9, Dow futures plunged just over 4% while gold and US Treasuries soared. (Markets are funny and tend to be unpredictable in the short term). Since the election, however, the Dow Jones Industrial Average has reached an all-time high.

Sure, Donald Trump is an unconventional politician and has said that he likes to be unpredictable. At this time, we’re not sure what to think or how he’ll govern. Once his cabinet is in place, we’ll have a better idea. Still, you may be thinking that a Trump presidency is “different,” but market volatility is certainly not something that we haven’t seen before. In the past 18 months, we’ve had several instances of investors feeling that “this time it’s different.”

Back in July 2015, the Greek financial crisis dominated the headlines. Investors feared Greece’s problems would spread to the rest of Europe. Then the following month, it was “Black Monday.” When the Chinese government devalued the Yuen, markets went tumbling down. At the beginning of 2016, the Dow Jones Industrial Average got off to its worst start ever dropping 5.5%. And most recently, we had Brexit. Shortly after Britain announced it was exiting from the European Union, the market lost 6% but days later gained back 8%. The bottom line is: Markets, like people, do not like change. But through all this hubbub, U.S. markets continue to hover around historical highs.

Back to your investments. What should you do to protect yourself during a Trump presidency? Nothing. If you’re diversified, you don’t need to sweat the headlines. We can’t predict the future, and we sure as heck can’t predict the markets. That’s why it may be wise to follow the investment ways of some of the world’s wealthiest families and most sophisticated investors. They manage risk through diversification.* This means not weighting one’s investments in with any sector of the economy such as energy or banking, or falling in love with an individual stock such as Apple.

Besides, your investment portfolio isn’t designed for a four-year presidential term. You’re in it for the long run. Investors who stay the course have historically been rewarded. Here’s one thing we can anticipate during the next four years. The markets will go up, and the markets will go down. And parts of your portfolio will do better than other parts. My advice is to stay disciplined, diversified* and focused on the future. If you’re not sure whether you have enough diversification*, a fee-based financial advisor can help you.

*Diversification does not guarantee a profit or protect against a loss.

The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets.

Why You Shouldn’t Panic During a Down Market

The past few days have been turbulent on Wall Street, and it’s been years since we’ve seen this kind of fear among investors. But don’t panic. The best way that I know to combat the fear of a down market is to look back in history and realize that the stock market is an upward reaching entity which occasionally takes a break and hovers at lower elevations for awhile.

Let’s look at the stock market’s history which is the only guide we have. The graph below illustrates every up and down market from 1949 through the end of 2014. Viewing this graph, it becomes evident that up markets far exceed down markets when measured by the percentage of rise and the number of years the markets rise.

For instance, there was a total of 780 months during that 65-year period and 606 of those months were up months for the market; conversely, there were 174 down months. The bottom line is that during this 65-year time period, the S&P 500 index returned 11.5%.

If you’re still anxious, my advice is always the same: stay disciplined, goal-oriented, and diversified. That’s the best way to navigate these market storms.

Up Markets Greatly Exceed the Down Markets/Change in the S&P500 (1949-2014)

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An index is a portfolio of specific securities (common examples are the S&P, DJlA, NASDAQ). The performance of which is often used as a bench mark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios, and investors cannot invest directly in an index. Past performance does not guarantee future results. Advisory services offered through Jeffrey A. Bogart, Registered Investment Advisor