How will the markets respond to the election?
This is certainly one of the prevailing questions following the election of Donald Trump as the 45th President of the United States of America. The actual question investors are asking is, “What should I do now?” In Particular, Baby Boomers who have retired, or are nearing retirement, want someone to guide their actions in order to maximize funds. Having so little time on the horizon, the potential for a mistake is a harrowing thought. For good or bad, the words of Paul in 2 Timothy 4:3 apply. Whatever you want to hear, there is an advisor ready to whisper in your ear!
Goldman Sachs Says Trump Win Doesn’t Mean Too Much For S&P 500
On November 9, 2016, Joseph Ciolli wrote an article bearing this title in Financial Advisor Online. The chief U.S. equity strategist at Goldman Sachs Group, Inc. postulated the S&P 500 Index would close 2016 at 2,100, less than 2% below the closing on Election Day! “The U.S. economy has been expanding for seven years and continues to grow at a subdued pace. We expect the U.S. stock market will climb slowly during the next few years in line with earnings growth”
“Purgatory of Hell?” What is ahead?
If your opinion is that the investment markets will move dramatically lower for an extended time, you are not alone. Ben Inker, Portfolio Manager for GMO (a private investment manager) has an entirely different prediction for the future markets. In a November 8, 2016 Think Advisor article he said portfolio return under the purgatory scenario would lose 36% in seven years but then level off. Under the hell scenario, a portfolio will lose only 30% over the next seven years but then it will continue to lose money. He closes, “Now is exactly the time we need to start building our battle plans for the challenges we will be facing in the coming years.”
Some Investment Strategists See Volatility and Uncertainty Ahead
If your own opinion is that the markets will see much more exaggerated movements in stock and bond prices, you can find advisors who agree! On November 9, 2016, Thomas Wilson, senior investment manager at Brinker Capital said, “The firm is not making any specific adjustment to portfolios at this time but looking for opportunities when markets trade off.” Tim Clift, chief investment strategist at Envestnet stated, “The decision to do nothing is probably the most likely scenario for most clients.”
Read Wisely, Decide Carefully
The point of Paul’s words to Timothy were meant as a warning. It was not going to be a positive for people to seek teachers confirming what was already believed. The all too familiar result would be, “They will reject the truth and chase after myths.” (2 Tim 4:4 NLT) The same holds if we are searching for investment advice. It is a confusing world, and there may be multiple currents moving investment values simultaneously. The temptation is to either put our head in the sand hoping for the best, or read those who agree with us do what we already wanted. The best action is to heed our repeated words, “Read widely, decide carefully.” We should seek opinions that are counter to our own and make investments with the longest timeframe possible. Of course, a solid decision is to make the Christian Churches Pension Plan a cornerstone of your retirement plan. A defined benefit plan providing a predictable income for life is not a bad place to begin!