Few topics in America are as polarizing as politics. With the presidential election as the embodiment of political discord, it’s no wonder last night’s results have caused such a stir.
Regardless of where you fall on the party spectrum, chances are you had a strong emotional response to the election’s outcome. The market certainly did, with the S&P 500 futures down as much as 5 percent as the election results came in. But, just as your emotions likely have calmed throughout the day, markets reversed course with the S&P 500 finishing up 1.10 percent.
This rapid realignment raises an interesting point, one we discuss with our clients regularly, about the importance of removing emotional bias from your investment strategy.
People like to say that markets hate uncertainty, but that’s inherently untrue. People hate uncertainty, not markets.
If there were no volatility, there would be no reasonable benefits associating with owning risk assets, such as stocks. There’s a reason high risks are generally associated with high returns. The challenge is to fight our human nature, which tells us to react to current market conditions (and likely make poor investment decisions at the worst times as a result).
If you’re hearing a “take action” message today, you’re listening to the wrong advice. Sure, a “hurry up and do nothing” message may not be as sensational or headline-stealing—but it’s the right message, because it works.
For more thoughts on investing during the Trump presidency, visit the below:
Investors: Don't Panic (Barron's)
Investment Advice for the Donald Trump Presidency (Forbes) - Peter Lazaroff, CFA, CFP®
