Is Trump Going to Mess With Your Investments? Seven Tips
Financial planner Timothy LaPean is watching a wave of fear and confusion sweep over clients after Donald Trump's stunning election as U.S. president.
They aren't just freaking out about their investments. In a sign of the impact of Trump's victory on those who didn't vote for the Republican, the Minneapolis-based certified financial planner says he's also fielding calls from clients who are women or members of the lesbian, gay, bisexual, and transgender community that go straight to their personal safety.
Then there are the meat-and-potatoes personal finance concerns. Here's a sampling—and what planners are advising.
You’re buying companies, not politicians
That's what Howard Pressman, a certified financial planner with Egan, Berger & Weiner, LLC, in Vienna, Va., reminds his clients: "The key thing to bear in mind is that the U.S. economy remains healthy and has shown itself to be quite resilient."
Ed Vargo, a private wealth manager at Burning River Advisory Group in Westlake, Ohio, suggests taking an even broader view. His advice? Ask yourself: "Do companies still want to maximize shareholder value? Do the great companies of America (and the world) still want to put out great products and services and provide a compelling place for employees to work? Do parents still want their kids to be educated and have more than they have? Do workers still want to retire at a reasonable age and enjoy their golden years? In short, do people and companies still aspire to a better tomorrow?"
None of those things have changed since last night, said Vargo, adding that politicians tend not to strictly follow through on their campaign rhetoric.
Remember, Trump is pro-growth
At the end of the day, a key part of Trump's platform is massive deficit spending on infrastructure and a lot of pro-growth policies, said certified financial planner Michael Kitces, a partner at Pinnacle Advisory Group and author of the Nerd's Eye View blog. "As we get through the knee-jerk reaction from last night, that's why we're already seeing markets normalize."
That initial market selloff was more likely about Trump's potential impact on geopolitical risk than on fundamental growth risks, said Kitces. With the dust seeming to settle as of midday Wednesday, he said, "it seems at least initially the markets are deciding those two roughly cancel each other out."
Mitigate risk, and don’t sell low
Chris Chen, a certified financial planner based in Waltham, Mass., tells clients "the economy and markets will survive Trump" and urges them to focus on the long term—and not to sell low.
In the short term, Chen might consider risk-mitigation strategies such as focusing on dividend- and interest-paying investments "to buffer against the likelihood that a mix of Trump policies plus a market that is arguably fully priced may result in a correction."
Clients might want to set aside cash from investments as a reserve for liquidity and buying in volatile markets, said Lili Vasileff, president of financial planning firm Divorce and Money Matters, in Woodbridge, Conn. She'd advise considering mutual funds and exchange-traded funds that invest in gold and natural resources.
Hunt for opportunities in the turmoil
“Now might be a good time to add commodity exposure, both because Trump promises to undertake infrastructure projects and because commodities might be a good hedge against a rocky dollar," said David Haas, a certified financial planner with Cereus Financial Advisors in Franklin Lakes, N.J. “But over time, a diversified portfolio will capture the winners from a Trump presidency, and if he really is able to stimulate the economy, the market will probably improve over time."
Pressman added that "certain sensitive industries, such as health care, will probably experience some turmoil, but others will rally based on the news.”
Focus on what you can control
Getting better educated about your money, investing in yourself or your family, setting new goals, exercising—all are tangible things you can do to influence your daily life.
"Do anything that positively impacts your life and forgo the rest," said Vargo.
That may mean not watching television news and not checking your balances for a bit. "Watching your accounts closely over the next 72 hours may increase your anxiety, but it's unlikely to increase your returns," said LaPean. He's reminding clients that at this point, we have few specifics about what the Trump administration will do.
Look to history
"The market has been able to withstand the most egregious world events, including dubious presidencies," Vargo said. "Look at all the major geopolitical events since World War II, many of which are more calamitous than a Trump presidency—the Cold War, Bay of Pigs, Vietnam, hyperinflation/stagflation, Great Recession of 2008—and look at the market's performance over that time. The historical record is crystal clear: The stock market will be just fine."
The analogy Pressman has been using to calm clients is Brexit. "After everyone got over the collective 'What the heck just happened?' the markets moved along. I believe we'll see the same thing here," he said.
Don't pop the cork quite yet
Trump supporters shouldn't expect the world to change overnight. David Mullins, of David Mullins Wealth Management LLC, is a financial planner in far southwest Virginia, and many of his clients have backgrounds in the coal and natural gas industries. "A Trump victory to them is like Christmas morning," he said. "My advice to them is not be too euphoric, to keep with a well-defined investment strategy and to be patient."
While the local economy would only be helped by the coal and natural gas industry getting support from Trump, Mullins reminds clients that "the laws of supply and demand are greater than whoever is in office, and company earnings drive stock prices long term."
Looking at it another way, Vargo said "we have no reason not to expect that Trump will say stupid things," but "one person cannot bring down the entire U.S. economy."
Updates with a new, seventh tip.