Traders with U.S. in­vest­ments shouldn’t be rash af­ter elec­tion

Money experts warn against chang­ing fi­nan­cial strat­egy ac­cord­ing to vote’s out­come

Toronto Star - - BUSINESS - PA­TRICK KENNEDY MIN­NEAPO­LIS STAR TRIBUNE

Money man­agers are get­ting a num­ber of ques­tions from clients about the U.S. elec­tion — not who to vote for, but how it could af­fect their money.

The his­tor­i­cal trad­ing data can be parsed a num­ber of ways, but the con­sen­sus view from money man­agers: Don’t be rash.

“You don’t want to trade your port­fo­lio based on the out­come of an elec­tion,” said Carol Sch­leif, chief in­vest­ment of­fi­cer of Ab­bot Down­ing, the Min­neapo­lis-based wealth man­age­ment arm of Wells Fargo.

Sch­leif ad­vo­cates stick­ing with your in­vest­ment strat­egy, since cam­paign rhetoric is gen­er­ally more se­vere than any pol­icy that even­tu­ally gets ne­go­ti­ated be­tween Congress and a pres­i­dent.

Strate­gists at Wells looked at four pos­si­ble out­comes: a Demo­cratic pres­i­dent and di­vided Congress; Repub­li­can pres­i­dent and di­vided Congress; Demo­cratic pres­i­dent and Repub­li­can Congress; and a Repub­li­can pres­i­dent and Repub­li­can Congress.

They don’t see more than a 40-per­cent prob­a­bil­ity for any of the four.

But their pre­dic­tion for the best pos­si­ble out­come for the mar­ket, based on his­tor­i­cal data, slightly favoured the 40-per-cent prob­a­bil­ity of a Demo­cratic pres­i­dent with a di­vided Congress.

“No mat­ter which way the elec­tion comes down, it will re­move a chunk of un­cer­tainty,” Sch­leif said.

Other in­vest­ment pros also cau­tioned not to drive long-term in­vest­ment de­ci­sions by the elec­tions.

“There is no ques­tion that em­pir­i­cal ev­i­dence sug­gests that mar­kets tend to get a lit­tle volatile the closer you get to an elec­tion, and even a lit­tle bit after­ward while the dust set­tles,” said David Joy, chief mar­ket strate­gist for Min­neapo­lis-based Ameriprise. “All of that ar­gues for a lit­tle bit of a cau­tious view.”

Joy be­lieves U.S. stocks may be a lit­tle over­val­ued right now, but that earn­ings growth should im­prove in the fourth quar­ter and that the U.S. econ­omy will do bet­ter in the sec­ond half than it did in the first. He be­lieves the mar­kets have likely priced in the prob­a­bil­ity of rate hik­ing from the Fed, so there re­mains room for the mar­ket to rise yet this year.

“We think from where the U.S. mar­ket is right now that we’ll close the year slightly higher,” he said. “Our year-end fore­cast that we made back in Jan­uary was 2,175 (for the S&P 500). We re­vis­ited it a cou­ple times, but haven’t changed it.

“By no means would we sug­gest you stay out of the mar­ket,” Joy said.

John Tous­ley, se­nior mar­ket strate­gist at Gold­man Sachs, told the Char­tered Fi­nan­cial An­a­lyst So­ci­ety of Min­nesota’s In­vestMNt con­fer­ence in the sum­mer that in­vest­ing should not be tied tightly to pol­i­tics.

His ad­vice: “Don’t go for the head­lines about who is best for the mar­kets. Ex­press your po­lit­i­cal pas­sion with a vote, not a trade.”

LYNNE SLADKY/THE AS­SO­CI­ATED PRESS

Cam­paign rhetoric tends to be more se­vere than the poli­cies that re­sult af­ter the elec­tion, bankers have found.

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