Whether you like it or not, Donald Trump is the President-elect of the United States. Regardless of the soon-to-be President’s stance on other issues, it’s safe to say that Trump is pro-business. The markets fared much better than expected on November 9 and 10, largely due to the speculation that Trump and his fellow Republicans might ease regulations in industries and introduce more tax cuts to businesses.
Market Outlook Following the Election
As soon as the election results began to indicate a Trump presidency on Tuesday night, the stock market plunged as expected. Dow Futures were down by over 700 points. Everything pointed to a bleak future. Then, the President-elect addressed the nation as the victor in an uncharacteristically calm and collected speech. Trump was humble and praised his rival Hillary Clinton. The transition of power was peaceful to everyone’s relief. Soon following the speech, the stocks began to pick up.
Stocks, in fact, rose to record levels since the Recession. The Standard & Poor 500 index is up by 4 percent in the post-election week. The market is stable and stocks are less volatile. Yields on the 10-year U.S. Treasury note hit 2.07%, the highest it has been since January. Stock values for defense companies soared. So did for the pharmaceutical industry, mostly because a Clinton loss means that prices for certain drugs will not be regulated.
Will the Stock Market be Made Great Again?
It’s easy to get excited by the high points of the stock market and rush to invest. But be extremely cautious. Most of the stock surges were based on speculation. While the stocks were good for some sectors, they looked far less so for some others. Tech stocks took a hit and continue to do so. Trump ran his platform promising to limit offshoring and bring manufacturing jobs back to America. Trump’s protectionist, nativist, and anti-immigration stance does not bode well for sectors like tech that depend on labor and skills from other countries.
Most financiers are hoping that Trump will not stick to many, if not all, of his campaign promises. For example, Bank of America’s stocks rose following the election on the speculation that a President Trump will not regulate Wall Street in an Elizabeth Warren-esque style. It’s also very important to note that the election has sparked a bond selloff. In the past several days, bond prices have collapsed. This is happening as the Dow Jones Industrial Average is rising to record levels.
Though the markets may not seem volatile, investors are particularly anxious. The anxiety was quite visible in the gold buying spree that followed the election. Prices for gold are rising. Spot gold was up 0.3 percent this Wednesday following gains in the previous session. Gold consultants like Lear Capital are experiencing, well, tremendous price hikes.
How to Invest in 2017
Investing, much like what this election has been, is an emotional affair as much as it is a data-backed affair. Investors should not panic and make rash decisions.
No one is sure what the economic policies of the next administration will be. Trump was infamously vague regarding his policy platform during the campaign. Following the election, he has backed out of many of the controversial campaign promises he has made. For example, the President-elect has backed out of the outrageous Muslim Ban and building a “big, beautiful wall” on the U.S.-Mexico border. The wall would now be part-fence, he said in a 60 Minutes interview aired last Sunday.
Rather than betting on what the next administration’s economic policy might be, investors should focus on a long-term strategy to protect against a potential meltdown or a devaluation of the U.S. dollar. It seems that purchasing gold as a long term investment is the soundest decision an investor can make right now.
Trump’s transition team is filling the next administration with largely establishment Republicans and big business lobbyists. It seems that the next administration will not be a threat to business or globalization as feared. However, it’s best to take the safe road and hedge your investment portfolio with precious metals.