Every presidential election creates a new energy and vibration in the financial markets. Whether it is positive or negative, the first few months of a presidential administration bring adjustments for investors and advisors as they react to the way a new president operates and the financial decisions that are made which can affect investments.
While the above statement has been true throughout American history, it is doubly significant in the presidency of Donald Trump.
There is no normal. Every day President Trump produces a tweet or headline or signs an executive order that gets interpreted by the markets as a good thing or a bad thing. Unlike with previous administrations, President Trump’s proclamations tend to be seismic in nature.
He makes decisions related to environmental protections and energy sources and the energy market soars. He makes statements about free trade or relations with China and international markets roil.
The health insurance issue is a perfect example. A new insurance system would certainly affect medical and hospital stocks, but through the first attempt to pass new legislation, every minute was rocked with confusion and uncertainty. Advisors working for clients heavily invested in the medical sector had to be fielding calls daily from clients wondering how the health care bill was going to matter to them and their portfolio.
For advisors, every day brings new information from Washington, D.C. that must be absorbed and then considered in light of every single client’s portfolio. Communication becomes imperative and constant. Investors are likely paying attention to what President Trump is up to and wondering how his words and deeds affect their portfolio.
Investors certainly believe a Trump presidency will be beneficial to the financial and investment world. In Spectrem’s quarterly wealth segmentation series study Financial Behaviors and the Investor’s Mindset, investors expressed their expectations for what a Trump presidency will mean to investment strategies.
According to Millionaires with a net worth between $1 million and $5 million (not including primary residence), 43 percent expect better investment returns directly as a result of the presidential election. Investors with more wealth are slightly more likely to believe the presidential election will provide better returns. However, only 29 percent of Millionaires said the new presidency will greatly alter their investment plans. That answer was much the same across all wealth segments.
Not only is the Trump presidency going to affect investments. Having a Republican-controlled House of Representatives and Senate means that legislative decisions aimed at reducing regulations and improving the culture for business will definitely have a trickledown effect upon the investment decisions of affluent investors.
So what is an advisor to do in regards to communicating with investors? Does every Trump edit require a phone call or email? Is that what investors want? Do they want to be ahead of the curve, or more certain how the President’s actions will affect the stock market before making a move?
President Trump also enjoys tweeting about prominent American businesses, in a positive way when they make an announcement about new growth, or in a negative way when the company announces a move out of the country or job cuts. How do advisors prepare for the unpredictable nature of Trump’s pronouncements?
If it has not happened already, advisors need to discuss with each investor how they want to move forward in light of a Trump presidency and a Republican-led legislature. This requires advisors to come up with their own interpretation of the affect President Trump will have on investments and then relay that to clients, keeping in mind that some investors will see the atmosphere as one of unbridled opportunity and others seeing it as a time of unparalleled uncertainty.
These are heady times. The relationship between advisors and investors will be tested, even as expectations are that the business culture will benefit from the new administration.