Election Day’s Impact on Investing
With Election Day upon us, many investors are asking what, if any, impact the election will have on the markets and their portfolios and, it follows, what, if any, changes should we be making in anticipation of the election results? Disappointing as it might be to hear, and as tempting as it might be to believe otherwise, the truthful answer is we do not know (yet). We will know more after the vote; until then there is only speculation about the impact of various policy proposals.
At MJB Asset Management we do not speculate. We invest based on current observations of where the markets are and what the risk/reward metrics are in real time in the present day. Stated differently, rather than trying to guess what might happen in markets without knowing the future, we put money to work based on what the markets are telling us in the present. As the answers to policy questions become clear, we will be able to observe and assess any impact on the markets and adjust portfolios if and when necessary.
In the meantime, until we see a change in market dynamics, i.e., until the markets tell us otherwise, I am maintaining our position in the equity markets. I have added a small position in smaller cap stocks, not in anticipation of the election but because our analysis indicates that the risk/reward ratio for smaller stocks has become attractive relative to parts of the market for larger stocks. For clients with bonds in their portfolios, longer term interest rates have been ticking up notwithstanding the Federal Reserve’s recent decision to reduce shorter term rates. Accordingly, I have continued to maintain a U.S. Treasury ladder to take advantage of the higher rates for clients in the bond market.
As I write this note, today is the running of the New York City Marathon. Tens of thousands of runners and hundreds of thousands of spectators gather along the 26.2-mile route through all five boroughs to cheer everyone on. No one talking politics. Each runner running for his/her own reason. The positive energy is infectious. In an interesting way, the running of the marathon is emblematic of the markets: untold numbers of participants engaging with others; no one talking about politics; each in the market for their own reasons, some the same as yours and some quite different. And it is the cumulative energy of the participants in the markets that helps drive the direction of the markets. As always, I will continue to monitor that energy, along with our other technical indicators as we observe the markets and stand ready to make any necessary changes to portfolios in the days, weeks and months ahead.
Thank you for your support and for investing with MJB Asset Management. As always, please give me a call or send me an email if you have any questions about anything in this letter or other aspects of your portfolios. I always look forward to hearing from you and am always happy to talk with you.
Disclosure: Financial instruments discussed here may not be suitable for all investors. Before investing in any investment portfolio, Client and Financial Advisor should carefully consider the client’s investment objectives, time horizon, risk tolerance, and fees. The opinions expressed here are as of the date reflected and are subject to change. Diversification may not protect against market risk. There are risks involved in investing, including possible loss of principal. Past performance does not guarantee future results.