Trump’s win leaves re­gion’s in­vestors with con­cerns, op­por­tu­ni­ties

Increased spend­ing ex­pected on in­fra­struc­ture and tax cuts are ex­pected from the new ad­min­is­tra­tion

Daily Local News (West Chester, PA) - - BUSINESS - By Brian McCul­lough bm­c­cul­lough@21st-cen­tu­ry­media. com @wc­dai­ly­lo­cal on Twit­ter

Area in­vestors may see a rocky road in the days to come as the na­tion ad­justs to a Don­ald Trump pres­i­dency but mar­kets will ad­just as they al­ways do to the new re­al­ity, sev­eral in­vest­ment ad­vi­sors said on Wed­nes­day.

“In elec­tion years, mar­ket volatil­ity is 30 to 40 per­cent higher than in other years,” noted Roger Aliaga-Diaz, Chief Econ­o­mist for the Amer­i­cas for the Van­guard Group based in Tredyf­frin. “In the be­gin­ning there’s a shake­out ... Sooner or later the mar­kets al­ways go back to fun­da­men­tals.”

The im­me­di­ate re­ac­tion as it be­came ap­par­ent Trump was go­ing to be vic­to­ri­ous Tues­day evening was not en­cour­ag­ing as the mar­kets gy­rated back and forth. By Wed­nes­day af­ter­noon, how­ever, the Dow Jones In­dus­tri­als closed up 257 points, or 1.4 per­cent.

“Ba­si­cally, stay fo­cused and above all don’t make dras­tic changes to your port­fo­lio” should mar­kets start vi­o­lently fluc­tu­at­ing again, Aliaga-Diaz ad­vised in a we­b­cast on the mu­tual fund gi­ant’s web­site.

While agree­ing cau­tion is called for, John Gar­vey, a fi­nan­cial ad­vi­sor with UBS in Philadel­phia, said in­vestors may need to ad­just their port­fo­lios as a re­sult of Trump’s elec­tion.

“In­vestors should be fo­cused on their fi­nan­cial plan and not let the elec­tion dic­tate what they do,” Gar­vey said. “There’s a bias with an elec­tion com­ing up that, ‘I have to do some­thing.’”

Many pulled out of the stock mar­ket as the elec­tion ap­proached de­spite be­ing ad­vised not to, Gar­vey noted.

“Ac­tu­ally, now is the right time to ad­dress (in­vest­ments) through ac­tive port­fo­lio man­age­ment,” Gar­vey said. “We had a plan for this.”

The com­pany had dif­fer­ent sce­nar­ios for clients de­pend­ing on the out­come of the elec­tion. The fi­nal re­sults, with Repub­li­cans tak­ing the White House and main­tain­ing con­trol of both the House and Se­nate, had only a 15 per­cent prob­a­bil­ity of hap­pen­ing in early Oc­to­ber.

“There is go­ing to be op­por­tu­ni­ties and some things that are go­ing to be neg­a­tively im­pacted,” Gar­vey said.

UBS sees op­por­tu­ni­ties in health care, de­fense and phar­ma­ceu­ti­cals while Trump’s stance on trade brings into play the pos­si­bil­ity of pro­tec­tion­ism poli­cies. Gar­vey and Aliaga-Diaz both pre­dicted in­fra­struc­ture spend­ing would rise and tax re­form would pass, es­pe­cially cor­po­rate tax re­form.

Still, “there’s not enough information yet to make whole­sale changes,” Gar­vey said. “As the days and weeks and months pass, we think there’s op­por­tu­nity.”

Here’s a look from the As­so­ci­ated Press at what na­tional ex­perts say to ex­pect:

WHAT’S GO­ING TO HAP­PEN TO THE MAR­KET?

The an­swer is that no one knows. Not even the mar­ket knows. Late Tues­day, the fu­tures mar­ket — where in­vestors place bets on where stock in­dexes will end up — was call­ing for a drop of at least 5 per­cent for the widely fol­lowed Stan­dard & Poor’s 500 in­dex. By mid­day Wed­nes­day, the S&P 500 was up, 0.6 per­cent.

His­tory has shown that a pres­i­den­tial elec­tion doesn’t sin­gle­hand­edly alter the stock mar­ket over the long term. Other fac­tors, such as how ex­pen­sive stocks are rel­a­tive to their earn­ings and what the Fed­eral Re­serve is do­ing with in­ter­est rates, are more im­por­tant fac­tors than who sits in the White House.

An­nual stock re­turns go­ing back to 1853 have been vir­tu­ally iden­ti­cal, re­gard­less of which party sits in the Oval Of­fice, at roughly 11 per­cent, ac­cord­ing to the in­vest­ment strat­egy group at Van­guard. The U.S. pres­i­dent may be the leader of the free world, but even that much power doesn’t al­low for sin­gle­handed con­trol of the econ­omy or in­ter­est rates.

WHY SO MUCH CON­CERN ABOUT A TRUMP PRES­I­DENCY?

Be­cause no one knows what kinds of poli­cies a Pres­i­dent Trump would en­act. One worry is that his elec­tion could lead to a global trade war, which would drag down prof­its for big U.S. com­pa­nies that in­creas­ingly de­pend on cus­tomers in China, Europe and else­where.

He also rep­re­sents un­cer­tainty, one of the big­gest buga­boos for mar­kets.

ARE OTHER PEO­PLE FREAK­ING OUT?

More cus­tomers than usual at Fidelity are call­ing in to ask what they should do, but only a few more. The call vol­ume is about the same as a typ­i­cal Tues­day af­ter a three-day week­end, Fidelity says. One mea­sure of in­vestor fear — an in­dex that mea­sures how much traders are pay­ing to buy in­sur­ance against fu­ture drops in the S&P 500 — ac­tu­ally dropped 15.5 per­cent Wed­nes­day.

WHAT SHOULD I DO WITH MY 401(K)?

Try to do noth­ing, even if the mar­ket starts to swing sharply, ex­perts say.

Stocks are long-term in­vest­ments, meant to be held for many years. Big swings in the in­terim

are nor­mal and should be ex­pected. That higher volatil­ity is the price that in­vestors pay in ex­change for the higher re­turns that stocks have his­tor­i­cally pro­vided over bonds and other in­vest­ments.

If you’re feel­ing ner­vous, maybe the un­der­ly­ing prob­lem is that your port­fo­lio has too much in stocks, says John Sweeney, ex­ec­u­tive vice pres­i­dent of re­tire­ment and in­vest­ing strate­gies for Fidelity. If you haven’t checked your 401(k) much the past few years, you likely have more in stock than you used to. The largest stock mu­tual fund has re­turned 183 per­cent since the start of 2009, for ex­am­ple, far out­pac­ing the 37 per­cent re­turn for the largest bond fund. So, un­less you’ve been re­bal­anc­ing your port­fo­lio reg­u­larly, you may have a much big­ger per­cent­age ap­por­tioned to stocks than be­fore. And as in­vestors get closer to re­tire­ment age, ex­perts sug­gest par­ing back on stocks and de­vot­ing more of their port­fo­lios to bonds.

“If this news event has caused you some anx­i­ety,” Sweeney says, “use this as an op­por­tu­nity to re­bal­ance.”

THE AS­SO­CI­ATED PRESS

Pres­i­dent-elect Don­ald Trump and cam­paign man­ager Kellyanne Con­way cel­e­brate dur­ing an elec­tion night rally Wed­nes­day in New York.

THE AS­SO­CI­ATED PRESS

Pres­i­dent-elect Don­ald Trump pumps his fist dur­ing an elec­tion night rally Wed­nes­day in New York.

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