It was a wild and surprising night. When news of a Trump Presidency first sank in, stock futures dropped sharply. This morning, we have some moderation. The question everyone is asking is, “What does this mean for our portfolios?”
Know that we take long-term planning seriously. Trying to predict short-term events is fruitless. Just ask the data guys about their models this morning! Instead, we design portfolios to match your goals and risk profile, always adjusting to events as they unfold. That is what we are actively doing right now.
Goldman Sachs has produced an economic impact statement that offers some guidance. The main positive from the report is that they are maintaining a GDP growth rate estimate for 2017 of 2%. The next few quarters, though, will present investors and business with a lot of uncertainty. That could dampen activity as all players try to figure out policy direction. Bottom line? Cautiously optimistic.
The big concern has to do with trade policy. The new administration could impose trade tariffs and tear up existing trade agreements without the approval of Congress. Such action poses significant risk to economic growth. This is an area we will monitor closely.
Some policies of the new administration may boost economic activity. In his acceptance speech, Trump spoke of spending on infrastructure. While this would have to pass a Republican Congress leery of increasing deficits, this would create more growth for the US economy. The balancing act between spending and the deficit could mean higher inflation. While bond and CD yields may go up, we expect volatility across all investments.
We have been watching the reactions in particular sectors. Consumer goods is down. Autos are down. Financials are up. Health care is up. Defense is up. Reactions in specific sectors could be due to the expectation of changes in policy or could be due to uncertainty overall.
We don’t anticipate wholesale changes in your portfolio. Rather, we are adjusting our models and will continue to make changes as campaign rhetoric gets changed into law. For now, we are monitoring developments and reviewing portfolios as we navigate through these uncertain waters.
Nancy Lottridge Anderson and Ryder Taff