JP Morgan: Predicts Clinton win. Predicts substantial market fall if Trump wins.
Goldman Sachs: Predicts Clinton win, Senate majority switch, and knee-jerk market sell-off.
Barclays: Predicts Clinton win. Said S&P would potentially fall 11 to 13 percent in sell-off.
Citigroup: Predicts a Trump victory could be followed by a 5 percent day after sell-off.
Wrong Wrong and Wrong again. Dow closed up 257 points the day after the election with the Russell 2000 (Small Caps) up over 3%. At the time of this post, the market is trading at all time highs.
We could fill another 20 lines of forecasters recommending to sell stocks before the election, scaring investors into cash, and endlessly predicting the sky will fall with a Trump win. This post is not intended to be political, but instead, it’s focus is on the disservice the media, pundits, and talking heads have laid on the public. They spout their “professional” guesses and opinions to a broadly generic investing public like they are one big actively traded hedge fund. As you can tell, we are not very happy with the reckless advice that comes from these outlets.
We are not saying that the market can't be volatile, and certainly cycles of longer down periods are possible. However, as you can see from the graph below, it is impossible to try and time the market to get out before the down days, and then back in before the market goes higher. We believe that a balanced account with a dedicated target percentage to equities and fixed income, along with active rebalancing will be a huge benefit to a long-term investment strategy.
Successful investing is often achieved when emotions are kept in check. The 2016 Dalbar market study once again reminds us what trying to outsmart the market really looks like. Over the last 30 years, the S&P 500 has averaged a 10.35% annualized return. The average equity investor has squeaked out returns of 3.66% over the exact same time frame. There are many reasons why individual investors have underperformed the market, but in the graveyard of coulda, shoulda and woulda, you will also find the bones of fear, greed, gut feelings, hunches, and acting on bad advice.
We have terrific clients at Windsor, and we commend them for their ability to see the forest through the trees. Except for a few welcomed calls asking our thoughts, we rarely see panic or capitulation with clients in times like the past week or two. Again, such great clients. We fully understand there will always be concerns that arise, whether it be from a specific event, or simply through normal market and economic cycles. Don’t ever hesitate to call or email your manager with any questions or concerns. Our promise has always been to tell investors what they need to hear, not what they want to hear. Many times this is easy, but sometimes it’s not. Another post will follow soon with our thoughts on moving into a new political cycle.