President Elect Trump and the Stock Market 2


First of all, Happy Veteran’s Day everyone. Please take some time today to think of and thank all the veterans who served our great country.

Ok, so by now everyone knows that Trump won the election.

However, I’m going to discuss what happened to the stock market immediately following his election, and the days that followed.

Trump was somewhat of a wild card to win the election…

With uncertainty comes worry which can lead to fear. So, the stock market did what was expected as soon as Trump was elected:

stock-market-election-day

Global markets drop as U.S. election results shock investors (CNN Money)

However, some of this may have been a “correction” since the Monday before:

“The Dow raced nearly 400 points on Monday as investors bet that Clinton’s chances of winning improved after the FBI cleared her in the email investigation.” (from the article)


This is nothing new though

How the stock market performs on, and after, Election Day (MarketWatch)

“Stocks have tended to fall the day after Election Day since 1928.” (from the article)

So, after Trump was elected the stock market was expected to drop… how much, no one could predict. For how long, also no one could predict.

However, it seems like the market has already corrected, or maybe even over-corrected slightly:

The Financial Markets Have Accepted a Trump Presidency (The Atlantic)

“But after the outcome of the election became clear, the markets stabilized, and on Wednesday, they rallied, a surge that carried over into Thursday morning, when it looked as if U.S. stocks were ready for another day of post-election increases. The Dow hit an all-time high, while the S&P rose 1 percent. But as of noon, markets eased after the morning jump, with the Dow up just 1 percent on the day and the Nasdaq dipping into negative territory.” (from the article)


So what’s the whole point of this article?

The point of this article is that the stock market is volatile and it swings back and forth more than a pendulum on a clock. The smallest whisper could set off a chain reaction of events which lead to dip or jump in the market.

This article serves as a reminder that you shouldn’t care about what the market is doing. Whether the market is up or down doesn’t matter to you. Either way you are putting your money into your 403b/401k/457s and IRAs every paycheck like clockwork.

Could you have made some money by buying/selling on election day or the day after? Sure. Some people do. But some people don’t.

You don’t need to be either of those people.

Remember The Philosophy. Stay the Course. If you haven’t already, go back to the Finance Fridays Roadmap and refresh your memory a bit.


If you want some additional (fun) reading, check this out:

“A BLINDFOLDED monkey throwing darts at a newspaper’s financial pages,” wrote Burton Malkiel in “A Random Walk Down Wall Street”, his 1973 bestseller, “could select a portfolio that would do just as well as one carefully selected by experts”.  via No monkey business? (The Economist)

For those who don’t want to read, I will quote the two most interesting parts from that article here:

“In a study Robert Arnott and his co-authors picked 100 portfolios, each with 30 equally-weighted stocks from the 1,000 largest American stocks by market capitalisation. 94 of the 100 “dartboard portfolios” did better than a market cap-weighted portfolio of all the 1,000 stocks.”

“Similarly, in another study Andrew Clare, Nick Motson and Steve Thomas randomly picked American stocks to construct ten million indices. An additional twist to their experiment was that the stocks were also randomly weighted. Nearly all of the ten million “monkey indices” delivered “vastly superior returns” compared to a cap-weighted index.”

Disclosure: I don’t own and haven’t read “A Random Walk Down Wall Street“. But I have heard it’s a good book. I do plan to read it someday.


TL;DR

Just a reminder that the stock market of yesterday, today, tomorrow, or even months from now doesn’t (and shouldn’t) matter to you.

Stay the Course. Save early. Save often. The Philosophy. Compound Interest.

Don’t forget about Blindfolded Monkeys Throwing Darts.

 

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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