Could a Donald Trump Presidency Spark a Stock Market Crash?
November 9, 2016
Donald Trump was elected America’s 45th president Tuesday, which could trigger an economic collapse and an epic stock market crash.
At least, those are the headlines in the financial press this morning.
Che Trumpvara wants to tear up NAFTA, slap tariffs on imports, and throw the insiders out of Washington. Wall Street responded to his revolution by sending futures down three percent, knocking 750 points off the Dow by 11 pm. Most analysts think it will get worse before it gets better, with a few predicting a 10% stock market crash over the next few days.
Some traders are clamoring into safe havens assets like gold and, oddly enough, U.S. Treasurys. Others don’t know what they’re going to do when trading opens Wednesday, because of the uncertainty about the New York businessman’s policies.
Yes, the people are rising up. But while it’s nice to see the latte-drinking elites get what’s coming to them, revolutions are messy. And judging by the stock market crash we’re seeing today, no one knows how it will play out. Retirement accounts and college savings are collateral damage.
So how should those of us stuck in the cross-fire respond? There are five messages I want to pass along.
1. Ignore the Stock Market Crash
First, ignore your portfolio on Wednesday. Safe to say many people reading this article have just seen their retirement fund take a big whack. Few of us make the most good decisions under pressure, even less so after losing tens of thousands of dollars.
Traders will be on their toes for the next few hours, days or a few weeks. The financial media is already spinning headlines like “How to Profit From a Donald Trump Victory?” Honestly, nobody knows what his Presidency will really mean.
Turn off the TV. Log off the computer. Go for a walk with the kids. The more distance you can put between you and your brokerage account today the better.
2. The Future is Bright
The more important questions right now?
Will entrepreneurs stop building businesses? Will engineers stop inventing new stuff? Will people stop buying Coke, Big Macs, and toothpaste?
Regardless of how you feel about President Trump, the answer to all of these questions is a resounding “No.” Business people will think up new ways to serve their customers. U.S. universities train over 70,000 engineers every year. Don’t you think at least one of them will invent something cool?
Over the past 100 years, American incomes have grown ninefold. During that time, the country faced recessions, inflation, asset bubbles, terrorist attacks, financial crises, and two world wars. Donald Trump and today’s stock market crash seems small by comparison.
3. Don’t Bail on Stocks
The stock market has a reputation for being a rigged casino. On days like this one, it can certainly feel like you’re getting fleeced. But by and large, the stock market—despite all of the headlines—has been more like a cash machine for patient investors.
Over the next 30 years, Corporate America will generate trillions of dollars in profits. Hundreds of billions of dollars will be plowed back into plants and equipment to earn even more money. The rest will be paid out to shareholders in the form of dividends and buybacks.
American business is not a force I want to bet against. For this reason, the stock market has yielded excellent returns for investors over the long haul. This has been true regardless of which party was in the White House.
4. Stay Balanced
While I love stocks, they’re not the only assets I keep in my portfolio. A combination of bonds, REITs, and gold keeps me level headed during chaotic periods. When one part of my portfolio is feeling the heat, it’s nice to see another holding on strong.
In fact, some balanced investors might make money today. Gold prices are up four percent at the time of this writing. Investors are fleeing into bonds, sending prices soaring.
I don’t ignore these asset classes because of low yields or a lack of dividends. Their purpose isn’t to make me money. It’s to keep me sane during crazy days like this one.
5. Take Responsibility
Why do I hate elections? All of these politicians running around pretending they can fix your life. I hate that because it’s a lie. Worse, it makes you think you can sit around on the government to fix your problems.
The first thing you must do is accept that you are solely responsible for your financial situation. Before you get angry, read that sentence again. I didn’t say you are the cause of your situation. I said you are responsible for it.
Forget today’s political revolution. No president can change your fortune for you. No Washington program will turn your life around. The sooner you accept that reality, the sooner you can begin making real changes.
