Donald Trump’s stunning election upset caused a brief violent reaction in the markets. But many clients of financial advisors are now wondering what will happen in both the short and long term as a result. Most advisors are reassuring their clients that market performance has historically had a low correlation with whoever has been President. But Trump’s loosening of market regulations and tax-reduction strategy for businesses may provide a significant boost to the markets during his administration.
Effect on Portfolios
Brittain Prigge, a partner and head of relationship management for Balentine, told InvestmentNews that the markets reacted the way they did because they don’t like being taken by surprise. “The reality is people are either thrilled or devastated. The market had priced in a Hillary Clinton victory and frankly they were flat wrong, as was the media.” (For more, see: Stocks Recover from Overnight Selloff on Trump Victory.)
Many financial planners have spent a great deal of time over the past several months explaining to their clients that their investments will most likely continue to perform as they have been after the election, regardless of who wins. The markets have so far reacted favorable to Trump’s election, as the Dow reached new highs in the following days. But many clients are still worried about the effect of the election on their portfolios, and advisors have been forced to spend additional time addressing their concerns and explaining that Trump’s policies are more likely to have a positive effect on their investments than a negative one.
Austin Frye, the founder of Frye Financial Center, told InvestmentNews that he spent the entire morning on Wednesday on the phone consoling clients who had voted for Clinton. “I’m reassuring them that the financial markets will be OK and that is not the area they have to worry about.” He has explained that capitalism is fundamentally resilient in nature and has the ability to “operate effectively outside of our political system.”
Some advisors feel that the election has created a good buying opportunity. Trump’s stated policies of reduced financial regulations and lower taxes are good news for stocks and his intention to foster economic growth will also be a shot in the arm for portfolio values as prices rise. (For more, see: Trump Administration: What’s Next for Corporate America?)
Eric Roberge, founder of Beyond Your Hammock, said in the InvestmentNews article that he sent a bulletin out to all of his clients on Wednesday morning saying, “If you have money on the sidelines ready to invest, the next few months might prove a good time to get into the market.”
Indeed, much has been said of buying opportunities in the biotech, energy, defense and infrastructure-related sectors as the economic policy of the Trump administration becomes clear.
Other advisors have been stockpiling their clients’ spare cash in order to take advantage of lower buying prices after the election. Prigge’s firm Balentine is selling bonds, gold and REITs in order to buy small and large-cap equities as well as holdings in emerging markets. “We think the market downturn is going to be temporary and this is a buying opportunity,” Prigge said to InvestmentNews.
The Bottom Line
Trump’s Presidency will most likely have more of a positive effect on the markets than a negative one. Clients need to be reassured that they should stay the course in their financial plans and investment portfolios and that this may also be a good time to buy equities. Time will tell how Trump’s policies impact the markets, but so far they have reacted favorably to his election. It remains to be seen how successful Trump will be at implementing his stated policies and how the markets will react in turn. (For more, see: Why Some Investors Think Trump is Best for the Markets.)