What the Trump presidency means for your money, and what you should do now (nothing, probably)
Click to read the story at Grow.
The seemingly endless election season is over, and now the real work begins: What will a Donald Trump presidency mean for your money?
The folks at Grow asked me to have a story on this natural topic ready for early this morning -- well, inside baseball, I had two stories ready. One of those will never see the light of day. Here's a taste of the story Grow published overnight Wednesday. You can read the rest at Grow's website.
During the Trump’s campaign, he offered few specifics about his plans to tackle issues like health care, taxes, or the minimum wage. That makes it hard to judge a lot of his policies or make dollar-wise predictions.
“So much of this election was about personality and character, of the candidates,” said Dave Gardner, a Colorado-based financial advisor. “We don’t quite know what a Trump presidency is going to look like.”
One thing that most observers agreed before Tuesday night, however, was a Brexit-style sell-off on Wednesday, as Wall Street digests news it wasn’t expecting. It was clear throughout the campaign that Wall Street favored a Clinton victory, and reacted that way with every piece of positive or negative news for Clinton. Trump represents uncertainty, and Wall Street hates uncertainty. Still, Wednesday’s reaction was bound to be an overreaction. While Dow futures had plummeted 800 points at one point as Clinton's chances to win went up in flames, those losses were reversed soon after New York markets opened. Proving once again:
“First of all, you shouldn’t be making any long-term decisions based on an election. I don’t think this should change your investment outlook at all,” said Gardner.
The election probably will have consequences for the way Americans obtain health care; and it will likely have tax consequences. Since both Trump and opponent Hillary Clinton talked about the need for family leave, there's reason to think that issue might get attention in a Trump presidency.
Student loan debt, college costs, and the federal minimum wage all have less certain futures now.
I explore all this in depth in my piece at Grow. But for now, here's the most critical piece thing to keep in mind in the weeks and months ahead: People exaggerate the importance that the President has on their lives and their finances. Your local school board probably has a lot more to do with your quality of life. That means you shouldn't do anything drastic.
Kansas-based financial advisor Desmond Henry said chasing short-term ups and downs is not for retail investors. Whatever you think of the election result, you should stick to your already well-considered retirement plans and stay the course.
“The best advice is the advice of doing nothing,” Henry said. “But for the average investor, doing nothing is the hardest advice to follow.”
It’s certainly possible that disappointed Clinton voters might make some dramatic steps, Henry said, such as pulling money out of the market. That effect would likely be short-lived, however.
A study named study "Political Climate, Optimism, and Investment Decisions" hints he may be right. It found that investors who side with the party out of power get itchy trigger fingers, trade more frequently and “underperform” the market. Impatience is not a virtue. But neither is obsessing over things you can’t control.
“There's been a lot of research that says there's things that impact your portfolio a lot greater than who the next president is,” Henry said. “Sometimes we get so consumed with who the next president is … they but you see that, ‘Hey, they aren't contributing to 401k…they took out second mortgage. You see people making foolish money mistakes that have a lot more significant impact on their finances.”
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