Note about the Election

This is the second time this year we are contacting you the day of a major geopolitical shocker.

Back on June 24, we wrote to you following the passage of Brexit (Britain’s vote to leave the European Union). In one important respect, Donald Trump’s election is similar. He succeeded despite the predictions of most pundits and polls.

Global stock markets dropped in the days post-Brexit. They then recovered in the ensuing months.

Today’s returns haven’t followed suit. As Trump’s victory became clearer last night, futures and overseas markets were sharply down. But by the morning, they reversed. The results as of market close today showed some markets (U.S., Europe, gold) are up. And some are down (emerging markets, investment grade bonds, Japan).

As Brexit demonstrated, knee-jerk reactions can be imprudent. Advising clients through myriad momentous events over the last 27 years tells us that it is generally necessary to take a deep breath and let the implications unfold.

Right now, the only rock-solid lesson is that forecasters are not infallable. Computers have enabled sophisticated modeling and the illusion of precision – whether it’s in polls or the markets. Yet, people cannot be accurately modeled.  

Investor Howard Marks' post-Brexit reaction pertains just as much to today:

There’s a huge number of moving parts, too little past experience, too many varying opinions, and zero clarity on how the (transition) will be handled. There are many pundits out there telling us what the consequences of (the election) will be. The only thing I’m sure of is that most of them are wrong, and if I were to join their ranks, I’d probably be wrong, too.

Here’s an international take from Aberdeen Asset Management, based in Scotland:

The United States remains a country where the rule of law is sacrosanct, where the demographics are relatively favorable, and where there are broad and deep pools of capital. This was the case yesterday. It remains so today. For long-term investors, these are the factors that will drive returns.

We wanted to contact you right away because many clients have asked us about the election's effect on their portfolios. Our process rarely results in reacting to the news of the day. Still, we recognize that the election may shift the landscape and result in new risks and opportunities. We remain prepared to re-position your portfolio as the implications become clearer.  

Please call or email us if you have any questions or concerns.