Donald Trump has completed his landmark quest and will become the nation’s 45th President after a contentious and often divisive campaign. In addition, the Republican Party has retained control of both houses of Congress. This outcome marks a significant reversal from just a few weeks ago when a Hillary Clinton presidency was highly probable and even a Democratic party sweep of Congress was possible.
While this outcome is certainly a shock to many, it is important to remember that the result isn’t a surprise to the number of American voters that spoke their collective will at the ballot boxes yesterday. The strength of a democracy is not in whether we like the outcome, but rather in how we accept the result as the voice and will of our country.
While many things are promised on the campaign trail, all newly elected Presidents enter with a constrained ability to enact their agenda unilaterally. As a result, immediate and sweeping political changes are a process, which give markets and the American public time to digest and react. The inability of a President to swiftly change policies is a strength of our political system, not a weakness of it.
Over time we have witnessed corporations and financial markets adapting smoothly to new political environments. The uncertainty surrounding the Trump presidency could be greater than a typical transition; therefore, the markets may be more volatile and take additional time to process any changes. However, the uncertainty itself is not unusual.
Separating political views and emotions from investment decisions is difficult. Whether this election result was your favored outcome or not, what we have learned over the years is that although Presidents can set an overall tone for the markets, over the long term, it is the underlying fundamentals of the economy and the strength of corporate profits that matter more. Overall, we continue to be encouraged by the underlying fundamentals in the economy and the related resilience of the stock market. Recently, encouraging economic data, including a record 73 consecutive months of private sector jobs growth, high consumer confidence, and an increase in manufacturing activity, all suggest a recession in the next year is unlikely.
As investors, we all need to try and put this election into perspective, as our investment horizons extend far beyond yesterday’s votes or any political cycle. And, the keys to your investment success of relying on independent investment advice and sticking to your long-term investment strategies should not change, regardless of who is in office.
As always, if you have questions, please feel free to contact me.