This has been one heck of a ride. We, as a nation, have a great number of wounds to heal, friendships to mend, and divides to bridge, but we survived.
Overnight, as the poll results were coming in, the stock futures market plunged more than 5%. If this looked and felt like the Brexit vote earlier in the year, it certainly was. It is notable that initial market reactions are actually a pretty poor indicator of long-term results.
If you haven’t looked yet, take solace in knowing that the market has recovered a great deal of those initial losses already. As of this writing, the futures market is still down (which indicates the market will likely open lower today) but where it stands as I write this is still comfortably positive for the week.
Whether you are feeling elated and hopeful about the results, or depressed and scared, let’s not get carried away with assumptions about what is going to happen over the next 4 years. History has proven that most of what is discussed during campaigns is dead on arrival in the real world. And before you go there, remember that the four most expensive words in the English language are “this time is different.”
In the short-term, we expect “shocks” when the unexpected happens. Markets do not like uncertainty and they do not like surprises. The market did not expect this.
As we wrote after the Brexit vote, these are not really ” market shocks.” Throughout history, the market has proven that it does an extremely efficient job of quickly repricing itself when new information becomes public. The only real “shock” is speculators and traders realizing how incorrect their predictions and assumptions were, resulting in them having to cover their bets.
Fortunately, you don’t have to invest that way. In fact, we don’t even refer to that as investing. We don’t play that game. We don’t predict. We don’t forecast. And we certainly don’t change a time-tested approach to personal finance based on someone speculating that a recession is sure to follow.
That does not mean you should not feel anxious and uncomfortable, or excited and hopeful right now. I will never tell you to stop feeling the way you do. As humans, that is part of our nature. But I will continue to challenge you to ensure that fear and elation do not override the sound decisions you have made in less emotional times.
At the end of the day, no one knows what a Trump presidency is going to look like, and that is going to result in a great deal of uncertainty. After all, this is a person that has changed his political party affiliation 7 times. Which Trump are we really going to get – the Democrat or the Republican? Does he actually believe everything he said during the campaign, or was that all just part of a game plan to win votes? Time will tell.
There is going to be a ton of speculation and prediction in the coming weeks and months. Try to keep a cool head. We can’t stop it, so we need to learn to live with it.
Fortunately, we are no strangers to uncertainty. Uncertainty has existed forever, and the future will always carry a great deal of unknowns. Humans desire certainty, but life and markets do not offer that. The best thing we can do is just accept that. Further, does anyone truly believe things are more uncertain today than they were on July 4, 1776?
Our level of comfort is nothing more than our reality minus our expectations. If expectations are greater than reality, we experience discomfort and disappointment. When reality is better than expectations, we feel comfortable and happy. So let’s expect volatility. Let’s expect uncertainty.
Keep focus on what you can control. As we wrote 4 years ago, your personal economy is going to be impacted far less than you think. The events of the last 24 hours do not change the fact that your life is still pretty great.
Rest assured that your financial plan is still sound, and the investment strategy we employ has survived and thrived through times far worse than this.
Finally, Google searches last night for “how do I move to Canada” spiked 350%. We weren’t one of those people searching. We are here and available, as always. And we look forward to working through the next 4 years together.