How will recent Trump appointees to the Presidential Cabinet impact our economy and markets?

How will the appointing of Peter Navarro, famed economist and strong opponent of Chinese economic policies, to the newly formed National Trade Council impact economic and foreign relations with China? Could it impact our US markets or on a personal financial level? How could other Trump appointees such as Steven Mnuchin and Gary Cohn affect our economic climate?

Banking, International / Global
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January 2017
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Your question is good, and while the outcome is unknown, one thing is for certain; there will be a steady stream of opinions from pundits and prognosticators about how the new administration will impact the stock market. Investors would be well‑served to avoid the temptation to make significant changes to a long‑term investment plan based upon these sorts of predictions. Trying to outguess the market is often a losing game. Current market prices offer an up-to-the-minute snapshot of the aggregate expectations of market participants. This includes expectations about the outcome and impact of elections. While unanticipated future events, surprises relative to those expectations, may trigger price changes in the future, the nature of these surprises cannot be known by investors today. As a result, it is difficult, if not impossible, to systematically benefit from trying to identify mispriced securities. This suggests it is unlikely that investors can gain an edge by attempting to predict what will happen to the stock market after a presidential election.

Markets can help investors grow their assets, but investing is a long-term endeavor. Trying to make investment decisions based upon the outcome of presidential elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.

I'm sure you were looking for something a bit more specific -which I certainly could wade into- but any accurate (or inaccurate) forecast in the economy or markets would be attributable to luck as much as anything else. 

Best, 

 

Adam C. Harding, CFP

January 2017