Considering the overall agendas of both candidates, it appears that many of the issues that Mr. Trump emphasized—trade and immigration, for example—are in areas in which the president has more unilateral discretion. By contrast, Sec. Clinton’s has mostly emphasized policies that would require congressional approval, such as infrastructure spending and subsidies for education.
This is perhaps counter-intuitive, since we expect that it is more likely that Sec. Clinton, if elected, would face a divided Congress, which could make passing legislation more difficult. We expect that Mr. Trump, if elected, would be more likely to face a Republican Congress, which would likely make passing legislative agenda items somewhat easier (particularly because the major aspects of his program, like his revised tax reform, resemble recent proposals from House Republicans).
From a market perspective, Mr. Trump’s emphasis on areas in which the president has somewhat greater authority to act alone might be a reason to expect higher volatility, at least initially, if he had won the White House. As we have noted previously, the presidential election is likely to lead to greater policy uncertainty overall. We would expect this to be particularly true under a Trump presidency, given his emphasis on issues which would have greater authority and the higher probability of congressional cooperation on some of the issues, like tax reform. Heightened political uncertainty would be likely to translate into increased financial market volatility, and the former is a good predictor of the latter.
Turning our attention to history, presidential terms have had positive market returns in virtually all presidential cycles. Returns during and after election years have traditionally been positive as well.
Political approval ratings are approaching all-time lows, while political polarization is approaching all-time highs.
During times of uncertainty emotions can run high, and we encourage people to not fall into the normal traps followed by the average investor.
Focusing on items that we do know for certainty, cash levels are at all-time highs while the stock market, bond market, and real estate markets are also at all-time highs.
Looking at global economic forecast, we’re still expecting a low-growth environment, including low inflation.
At Mission Wealth, our investment philosophy is deeply rooted in diversification and we continue to enhance the portfolios with income-generating ideas.
Over the past number of years, we’ve increased the alternatives suite within the overall portfolios to account for the environment that we’re in today.
As more information comes to light, we’ll make sure that we’ll share that information with you. In the meantime, if you have any questions, please feel free to contact your client advisor.