Trump’s Presidency: Fear & Greed in the Market

It is no secret that Trump has caught the attention of many around the world. It just-so-happens that a heavy portion of our client meetings (try everyone of them for the past year) involve discussion about politics – Trump, Clinton, and the election – not healthcare, ISIS, investment portfolios, or financial planning, even. Many people may be weary of Trump and his decision-making tactics; some may even be terrified of the short fuse and seemingly lack of discretion that Trump is rumored to have. Fear may be perceived as very high surrounding Trump’s erratic tweets, his ego, his remarks to foreign countries, the fear of him “poking the bear” or starting a worldwide war. I get it.

Fears such as healthcare and social security going away may seem extreme, but the concerns are certainly valid. And while valid, they also may be overflowing with emotion, which can lead to terrible investment decisions. That is why I want to share my insight as a financial advisor, and friend, on how to avoid allowing emotion and fear sparked by politics or the economy to creep into your investment decisions.

Recently, I was invited as a financial advisor to speak to a group of retired executives at a local country club. I chose to speak about Trump and his potential influence on the market and the economy. I must say, the turnout was “Hugeeeee….” (pun intended)! I called the presentation “One Tweet Away.” Some highlights from the presentation include the following disclaimer I like to give: “Analysts, economists, and weathermen are like cross-eyed javelin throwers. They never hit their marks, but they get the crowd’s attention.” You loved that, right? You are welcome. Anyways…my point is this: So many people, heck, the entire suite of news stations, all talk about predictions about the market – a recession, the DOW hitting 25,000 – but an educated guess may be all that these predictors are able to offer.

Without attempting to make any predictions, here are three reasons that I believe this could be a volatile year for our market and economy:

1) The market is priced 6 months ahead – its pricing in Trump doing all these big ticket items, such as tax cuts among other changes;
2) Trump is a negotiator and he is used to overpromising to get what he wants…the market may view him, for example, not getting the 15% corporation tax rate, and instead, a 25% rate not as good and the market could drop because it didn’t live up to expectations. Even though, it would be a big deal to get any tax reform through Congress.
3) The one tweet away fear…you never know when we may wake up to a tweet that sends chaos in the markets! Gulp.
The bottom line is this: Stick to your plan! In my opinion, cash on the sidelines, retirement accounts that are growth-focused, and a balanced portfolio in your middle bucket may be key to weathering this storm. Don’t let fear dictate your long term plans- easier said than done, yes. But that’s why my job exists!

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The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of David Adams and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

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