Being a financial planner sometimes allows me a unique window into the thoughts and emotions the public is currently having around the economy and investments. Interestingly, in the days that followed Donald Trump's victory, I mostly heard from clients, family, and friends a desire to increase their allocation to stocks and the expectation that positive investment returns were on the way.
That outlook seems to have changed, however, in the last few weeks. I'm now hearing fear of the coming changes. Indeed, recent conversations have been about a desire to reduce equity allocations and take shelter from expected social and economic malaise. Some folks are expressing a desire to protect their retirement savings from Donald Trump, even going so far as to say they are terrified of what may happen to the economy under Trump's potential mismanagement. Concern regarding cuts to social security and Medicare, federal workforce reductions (i.e. job loss), tariffs, and runaway inflation are increasingly common discussion points. Questions about moving investments to someplace safer, like CDs or money market funds, are asked with increasing frequency.
So, what do I say? The same thing I always say. No matter who the president is, whether or not a global pandemic is at hand, or you just had some bad cantaloupe for breakfast, don't let your current emotions dictate investment decisions. Put down down the newspaper, stop reading CNN/FOX/NPR and instead, let the data and hard numbers guide the investment process. Look at what the stock market is actually doing, not what you think it might do (or should do). Again, look at what is actually happening. I will keep saying this until I'm blue in the face - the market, in almost all instances, will be a much better guide than your brain.
What is actually happening? Credit markets are still strong, the advance-decline line is confirming new highs, there is a paucity of "distribution days" in the major indexes, and a lack of negative divergences in various momentum measures. Sure, there's always something to worry about (recent underperformance of the semiconductor sector, for example) but, on the whole, the market is still acting relatively healthy. The "weight of the evidence," at least right now, just doesn't support, at least not yet, a longer-term negative outlook. Might that change next week, next month, or sometime later in 2025? Absolutely. But, for now, I'll continue to suggest investing based on what is, not what you worry might be. As the old investing axiom goes, "Trade what you see, not what you think!"
Comments