I should probably have called this article The Trump/Clinton Non-Effect. There is plenty of discussion about what the repercussions would be on business and the markets if either of these candidates become President. I have been talking to various money managers and market analysts to get their take on what to expect. I thought you might be interested in some of their insights.
First of all, I have to disclose that I prefer to place my own and my client’s money with portfolio managers who tend to have concentrated portfolios of companies that they know extremely well. Whether we own their stock or their bonds, the focus now is on owning quality companies that will do well in any political climate. As long as the price paid for those companies is reasonable and the growth and stability of the companies is not tied to the winds of politics, we will all continue to share in the profits.
Having said that, there is the potential for a temporary drop in share prices after the election—or even before if investors get nervous. In anticipation of this, many fund managers continue to hold significant cash positions. They are waiting for a market drop so that they can buy good companies if they go on sale. However, some managers are fully invested because they are comfortable with their holdings, but many still have cash to distribute should we get a correction. This “cash” approach lowers the risk of loss and provides opportunity for future growth.
Overall, the consensus is that no matter who gets into the White House, there are enough checks and balances in the U.S. political structure to limit the damage any president could potentially do. As Obama has found out, it is not easy to get even sensible changes through Congress.
Furthermore individuals, families, and businesses are going to continue to need the goods and services that the corporate world provides to us, the consumers. As long as those companies we invest in through our portfolio managers are financially strong, have good growth prospects, and are well diversified through geography and industry, they will continue to function as they have done in the past. Have a look online at some of the mutual funds you own to see the quality of the companies within them.
Lastly I will comment that in my twenty five years in this business of advice and investing, I have never seen the portfolio managers work harder to earn their keep. Historically, there is no playbook for this lower for longer economic growth rate and low interest rate environment. Interesting times!
Interesting evaluation Kay however I agree that there should be no difference in market reaction, who ever becomes US President. Why ? I see one Candidate as weak and the other as far too Bullish thereby it doesn’t matter on the short term. Long term is hard to predict an opinion. Depends on how the world finds them during their term..