Donald J. Trump will formally become the 45th President of the United States on January 20, 2017. This is the reality we live in no matter how you feel about the situation. To say candidate Trump was unconventional would be an understatement. I imagine President Trump will prove just as unpredictable. Here are my thoughts as an amateur investor in this new reality.
The Trump Effect
You probably have already heard that Mr. Trump has taken several corporations to task via the Twitter. If you haven't already, this is a video worth watching.
In case you missed it, in the 5 minutes after Trump's tweet, Toyota lost $1.2 Billion in market value! Toyota is not alone, Mr. Trump have similarly turned the "Trump light" on many other companies (see 19 companies that Trump has tweeted about). Whether President Trump can use his bully pulpit to shame all companies into creating or at least preserving American jobs remains to be seen. But I do get the sense that nobody is safe.
I consider myself an amateur investor. Sure I used to frequent outlets such as SeekingAlpha, Bloomberg and the Motley Fool and once-upon-a-time even ventured as far as listening in on the quarterly earnings call of America's favorite fruit company. But that was a long time ago. Nowadays I'm possibly the most boring investor - I only dollar-cost average into the S&P. So take my views with a brick of salt. Here are what I consider the reactions one might have to a post-Trump economy:
- Act like nothing happened - trust in the long term track record of the market and keep investing the way you always have. If you're like me, most of your investing is done automatically so this would take literally "zero" effort. There's been 44 presidents before this one so why should you behave any differently?
- Become an active investor - Toyota's misery could be your bliss. Imagine what would have happened if you had the foresight to short TM before Trump's tweet. If you're willing to put in the work to predict which company is going to get a Trump tweet, you stand to make quite a pretty penny.
- Sit it out - sometimes the best way to not get hurt is to not get on the court to begin with. Trump will be president for at most 8 years - which depending on your perspective may be an acceptable length of time out of the market. Of course you risk missing significant earnings in case the Trump years turns out to be more like the Clinton years. But at the same time, you won't risk losing your entire retirement savings either.
I'm choosing option 1 by method of elimination. Option 2 would demand too much of my time and attention. Been there, done that, don't want it anymore. Option 3 is worthy of a serious consideration but I was able to eliminate it as well: as someone who stands to see a significant income bump in the near future, even if I lost every single penny I invested in the next 4-8 years, it wouldn't be that big of a hit. Think of it this way - I'm investing in thimbles now. 10 years from now? I'll be investing in shovels. To me the risk of losing thimbles-full of cash is more acceptable than missing out on what those investment have the potential to earn in the long term.
What do you think? Are you making any changes to your investment plan?
Chad Chubb, CFP ® founded WealthKeel LLC to help physicians navigate the complexities of financial planning. Today, we utilize true financial planning and custom-craft plans for residents and young doctors in the Philadelphia area and across the United States. From investments to insurance and student loans to goal planning, we tailor a plan to address your specific needs and circumstances. We will be by your side, today, tomorrow, and for decades to come to help you plan and build for all of life’s course corrections.
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