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How Will a Clinton or Trump Win Affect Your Investments?

How Will a Clinton or Trump Win Affect Your Investments?

Thursday, 05 May 2016 11:45 AM Current | Bio | Archive

With all the name-calling so far in this year’s presidential campaign, here are a couple more words to add to the mix: bull and bear.  How will an eventual win by either of the front-runners Hillary Clinton or Donald Trump affect the stock market? 

That remains to be seen, but lurches in the market will likely take place long before the new president is sworn in.  Why?  Because experts and novices alike will make their bullish and bearish predictions, and even buying and selling, based on where they expect our country’s headed, and others will be affected by the contagion of worry.

It appears, barring contested conventions, that Clinton and Trump are headed into the general election.  Even the idea of another candidate emerging at convention is waning as the GOP is grudgingly stepping up to support Trump.

But no matter which candidate you back personally, if any, our new president could set a series of political and financial dominoes tumbling.  In past election years, especially those which offer no incumbent candidate, the market’s reaction was uncertain, because that’s exactly what the outcome will be: uncertain. Without a candidate who’s a known commodity investors turn wary.  Which party will have the advantage?  What new legislation or regulations may be introduced? 

The answer to these, and many other questions, will impact not only the U.S., but the entire world.  So here’s a look at what the November election could mean for the stock market.

A win is a win is a win. But the full consequences of a Hillary Clinton victory may depend on whether she wins by a landslide or a sliver.  If she were to eke out a win by just a small margin, experts see the Republicans maintaining control of the House, while Democrats will suddenly outnumber their GOP counterparts in the Senate. 

If you think that would be a nightmare for passing legislation, you could be right.  But for Wall Street?  Oddly, statistics show that historically a divided government results in the best outcome for the stock market.  It seems the market likes checks and balances almost as much as the Founding Fathers.

But what if Clinton wins big?  The “coat-tails effect” of a landslide could result in the Democrats taking control of both the House and Senate.  It’s not a foregone conclusion, but this assumption is based on the idea that when a presidential candidate has that much popular support, his or her voters will likely also vote for other legislators from the same party, often causing a shift in power. 

If that happens, financial weekly Barron’s predicts Democratic domination doesn’t bode well for investors or the market, presumably because Democratic lawmakers are traditionally seen as more antagonistic to business and more likely to impose new taxes and regulations.

Notably, though, the market appears less concerned about Clinton herself.  In general, the sentiment seems to be that Hillary Clinton’s policies are unlikely to contain any big surprises.  If nothing else, she has a long track record and is not known to be anti-business.  But Donald Trump? Everything about his candidacy has defied predictions.  He seems to delight in defying expectations and making pronouncements that shock pundits and even our international allies.  So what happens in the case of a Trump win?

Well, the billionaire-turned-politician has certainly shaken up the campaign with his often-contentious, straight talking, anti-politically-correct opinions.  “So what?” you may ask.  

But though he’s certainly proven himself to be a successful businessman, the unknown factor is how his colorful personality and pronouncements will play to U.S. legislators and world leaders.  He’s pledged to become “more presidential,” but then backs off, saying he’ll do it later.  Why fix what’s not broken and alienate voters who gravitate to him for the very reason that he tells it like he sees it?

So how might a Trump presidency affect the stock market?  The biggest initial outcome would be uncertainly in the market, and investors are generally not fond of uncertainty.  On the campaign trail, Trump has blasted Democrats and fellow Republicans alike.  He’s gone after reporters, world leaders, fellow candidates and their wives, even people with disabilities. He’s pledged to stop ISIS and illegal immigration, building his reputation on the idea of building walls, not tearing them down. 

Investors worry about the reaction such potentially divisive policies could cause — ranging from a lack of legislative support to unrest, broken global alliances and an economic decline.  His declared intention to repeal Obamacare would impact the healthcare industry and related stocks.  His take-charge stance on world politics could adversely affect trade with China, Mexico and others. 

On the positive side, his tax plan could lead to increased spending, which traditionally creates an improved economy and rising stocks.  His experience as an entrepreneur presumably makes him business-friendly, which is also seen as good for the market.

So far, this has been a presidential race for the record books. Very little has happened over the course of this campaign that could have been foreseen.  What happens next is also unsettlingly unpredictable.  So while experts advise us not to overreact, because panic-selling can be devastating to your portfolio long-term, I would add: make sure you have your backup plan in place.  Particularly for those over forty, for whom retirement is on the horizon in the next ten to twenty years, it’s crucial to ensure you’re not overly market-dependent. 

Many investors think they’re properly diversified when they simply hold a variety of paper assets, including stocks and bonds.  But true diversification means also owning tangible assets that resist forces that drive down the market and the dollar.  Gold and silver, by which I mean physical coins (not futures and ETFs, which are just more paper), offer investors a place to protect the buying power of their dollars over the long term.  It also doesn’t hurt that they’re also comparatively impervious to the ravages of inflation. 

One thing that’s certain: This turbulent presidential election cycle is one important factor in why I’m seeing a sharply increased number of investors who want to roll over their 401(k)s and IRAs to a gold IRA.  I’m not guessing; clients flat-out tell me they want to make sure whatever happens in November, it doesn’t derail their plans for a secure retirement.

Of course, historically the presidential changing of the guard has been just one factor among many that affect markets.  This year should be no exception.  Then again, it has been pretty exceptional so far. 

Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.

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With all the name-calling so far in this year’s presidential campaign, here are a couple more words to add to the mix: bull and bear.
clinton, trump, investments, president
Thursday, 05 May 2016 11:45 AM
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