How to man­age your money in a ‘Trump slump’

The Washington Post Sunday - - BUSINESS - Michelle Sin­gle­tary

There’s at least one cer­tainty about the stock mar­ket.

It’ll go up and even­tu­ally come down.

Last week, we wit­nessed this truth about in­vest­ing. The mar­kets re­sponded with trep­i­da­tion af­ter a se­ries of scan­dals hit Pres­i­dent Trump.

Trump shared highly clas­si­fied in­for­ma­tion with Rus­sian diplo­mats. He fired FBI Di­rec­tor James B. Comey. He may have tried to get Comey to end an in­ves­ti­ga­tion of former na­tional se­cu­rity ad­viser Michael Flynn. And now a spe­cial coun­sel has been ap­pointed to in­ves­ti­gate pos­si­ble Rus­sian in­ter­fer­ence in the elec­tion.

Many ex­perts think it wasn’t these con­tro­ver­sies that pushed stocks down. It’s that the scan­dals may get in the way of tax cuts and other busi­ness-friendly leg­isla­tive mea­sures.

So here we are, reg­u­lar in­vestors just try­ing to grow our money enough to re­tire or send our kids to col­lege. As the stock mar­ket climbed in re­cent months, peo­ple be­gan to call it the “Trump bump.”

But all good things come to an end in the

in­vest­ing world. The ques­tion now is: Are we about to see a “Trump slump,” and, if so, is there any­thing you should be do­ing with your in­vest­ments?

Here’s a roundup of ad­vice from some cer­ti­fied fi­nan­cial plan­ners.

Carolyn McClana­han, founder of Life Plan­ning Part­ners in Jack­sonville, Fla., says politics should not play any part in your in­vest­ment de­ci­sions.

“Peo­ple should have an ap­pro­pri­ate as­set al­lo­ca­tion based on their goals, time frame, and fi­nan­cial and psy­cho­log­i­cal abil­ity to take risk,” she added. “Don’t pay at­ten­tion to the noise that politics cre­ates.”

Larry Stein, pres­i­dent of Dis­ci­plined In­vest­ment Man­age­ment in Deer­field, Ill., says Trump was get­ting too much credit for the mar­ket rise any­way.

“The bump was driven largely by stronger-than-ex­pected [cor­po­rate] earn­ings, much of it due to sur­pris­ingly strong re­sults over­seas,” he said. “Op­ti­mism around the elec­tion may have added an ex­tra jolt to the pos­i­tive en­vi­ron­ment, but that wasn’t the main driver.”

Stein says the un­cer­tainty now build­ing in the U.S. po­lit­i­cal en­vi­ron­ment may have a neg­a­tive im­pact on stocks, which is why he says in­vestors might want to add global stocks to their port­fo­lio.

“Stocks are for long-term goals, and in­vestors should try not to fo­cus on short-term fluc­tu­a­tions,” said Michael Guillemette, as­sis­tant pro­fes­sor of per­sonal fi­nan­cial plan­ning at Texas Tech Univer­sity, who echoed Stein’s ad­vice on di­ver­si­fy­ing your hold­ings.

Robert Sch­man­sky, pres­i­dent of Clear Fi­nan­cial Ad­vi­sors in the Detroit area, said, “By the time we hear the lat­est news, it’s al­ready too late to act. The best plans are long term, and rec­og­nize we will have rocky pe­ri­ods. If you have a lot in the mar­ket, con­sider adding in­vest­ments that may not cor­re­late with stocks, like pre­cious met­als and real es­tate. Prob­a­bly the best thing you can do is re­play 2008’s mar­ket in your mind and think about if you were bet­ter off wor­ry­ing or stick­ing with your plan. Most in­vestors did best by stick­ing it out and stay­ing in­vested.”

A. Scott Ward of John­son Ster­ling in Birm­ing­ham, Ala., still sees room for growth. “The core ques­tions for long-term in­vestors re­main the same. To what ex­tent, if any, does volatil­ity change your fi­nan­cial goals? Do you have any rea­sons to doubt that U.S. com­pa­nies can find ways to grow and thrive in the next 20 years, re­gard­less of the po­lit­i­cal cir­cum­stances?”

Joseph Kelly of Valic Fi­nan­cial Ad­vi­sors in the Philadel­phia area says some cau­tion is in or­der.

“His­tory has proven that mar­kets ab­hor un­cer­tainty,” he said.

“The chaos that is hap­pen­ing in Wash­ing­ton cer­tainly has stirred the pot and in­fused doubt among the in­vestors of Amer­ica. I never rec­om­mend ‘tim­ing’ the mar­ket; how­ever, these are un­prece­dented times. I think it would be pru­dent to take some prof­its and put some liq­uid­ity on the side­lines for a wait and see pe­riod … time to de­crease your risk pro­file for a while.”

James Watkins, man­ag­ing mem­ber of In­vestSense in At­lanta, pointed out that many ex­perts be­lieve the mar­kets have had a sig­nif­i­cant run up, and a drop may just be due. “We have ad­vised our clients to con­sider re­duc­ing their eq­uity ex­po­sure, es­pe­cially in 401(k) and other taxde­ferred ac­counts since there would be no tax im­pli­ca­tions in mak­ing such changes,” he said.

Bar­bara Roper, di­rec­tor of in­vestor pro­tec­tion for the Con­sumer Fed­er­a­tion of Amer­ica, says it’s “gen­er­ally a mis­take to fo­cus on short-term ups and downs in re­sponse to the politics of the day or any­thing else. Do­ing so risks mak­ing poor mar­ket­tim­ing de­ci­sions based on an emo­tional re­ac­tion to the news.”

The im­por­tant thing to re­mem­ber is that you’re in it for the long haul.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.