Election Response

December 13, 2016
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“At its best, life is completely unpredictable.” – Christopher Walken

Dear Clients & Friends,

I know for many of you the unpredictability of this unusual election season may not feel like life at its best. To top it off, financial markets are reacting negatively to the growing likelihood of a Trump presidency. This type of reaction is not atypical in any presidential election, be it a victory for Trump, Clinton, Obama, Reagen, Roosevelt or Bush, amongst others.

According to data compiled by Bloomberg, in the 22 elections going back to 1928, the S&P 500 has fallen 15 times the day after polls close, for an average loss of 1.8 percent. But that statistic doesn’t tell the whole story for you, our client, as an investor.

No signal from election reaction

What the market does on any given day is irrelevant in a long-term investment plan. In 9 of those 15 instances where the market fell after the presidential election, stocks were actually higher one year later.

No matter the short term market movements, presidential elections typically don’t have a long-term effect on market performance either. Vanguard research going back to 1853 shows that stock market returns are virtually identical no matter which party controls the White House. The returns have averaged a positive 11% per year whether it was a Democratic or Republican president.

Average annual stock market returns based on party control of the white house

We don’t know what the future holds, but we do know will be here as your partner for the long-term and better future ahead.

As Warren Buffett said at the Berkshire Hathaway 2016 Annual Meeting of Shareholders regarding a Trump or Clinton Presidency: “Twenty years from now, there’ll be far more output per capita in the United States in real terms than there is now. In 50 years, it’ll be far more,” Buffett said. “No presidential candidate or president is going to end that. They can shape it in ways that are good or bad, but they can’t end it.” The bottom line is that no president is going to prevent the American people or American economy from a better future.

As your trusted advisor, we choose not to react to the Presidential election. We choose to focus on the factors that are in y(our) control that can help you lead your best financial life. These factors include:

Having clear goals and real plan
Ensuring your portfolio is well diversified amongst asset classes and geographies
Keeping investment costs low
Focusing on the long-term
If you have any questions or concerns, please do not hesitate to reach out.

Thank you for your continued trust and support.