Wednesday, 12 October 2016

The US election and investment markets

This scary clown craze has just gotten out of control. They've even got 2 running for president in the United States.



Regardless of who you might think will be a better or worse president, should you be making changes to your investment portfolio in light of the upcoming election and the uncertainty it poses? Other than investing in Mexican wall building companies - of course!

Well, I'll let you in on a little secret. Everyone already knows that an election is coming up and everyone already knows that both candidates of the 2 major parties seems to have some flaws - like is always portrayed. It's not a secret, you and I don't possess any special insight.

This is the thing with investment markets, they're amazing at pricing in today's news and pricing in risk and uncertainty. What you already know is already in the price.

Sure, if the unlikely scenario of Trump being elected actually happens, there probably will be some volatility, because at the moment, that isn't the expected outcome and if Trump is elected it will add some uncertainty, but the long term investor doesn't care about short term volatility. The long term investor will be invested for this next presidential term and probably the next 5 presidents as well.

The chart below shows the US market since 1926 and shows you the president and the political party they represent. The key takeaway here is that over the long run, the market has provided substantial returns regardless of who was residing in the white house.

Equity markets can help investors grow their assets, but investing is a long-term endeavour. Trying to make investment decisions based upon the outcome of presidential elections is unlikely to result in a favourable outcome. At best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.

Glenn Hilber is a Certified Financial Planner with over 9 years experience and the owner of Precision Wealth Management.

This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.

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