After a seemingly endless campaign, the voters have spoken and have elected Donald J. Trump as our 45th President. Hopefully, the national mood will become more positive as we move beyond this election. It was truly a historic election as we had our first ever female candidate in Hillary Clinton whom also is the first candidate in modern times to have already resided at the White House for 8 years. On the other side was Donald Trump, the non-traditional, non-establishment self-made businessman who appealed to so many disenfranchised Americans. It is our opinion that the election of Trump was a referendum against the Washington establishment; both Democrats and Republicans. As Donald Trump said in closing his acceptance speech early this morning,” it’s been what we call an historic event, but to be really historic, we have to do a great job. And I promise you, I will not let you down. We will do a great job.” This election has both energized and fatigued us and it’s now time to focus on what the next four years may bring.
Trump's election certainly took most by surprise as all of the polls leading into Election Day favored Hillary Clinton. The markets do not like surprises and we expect to see heightened volatility over the next several days, similar to the surprise we got in late June with the Brexit vote. We view this as a buying opportunity as the fundamentals of the economy have not changed overnight and will not change anytime soon. Trump will undoubtedly introduce new ideas into the policy landscape, but whether these ideas will be accepted and ultimately make a positive impact will not be known for some time.
Along with the surprising presidential win the Republican Party also solidified their control of Congress. Some investors are of the mindset that a division of power between the Executive Branch, the Legislative Branch and the Judicial Branch is best for the markets, but that may not be reality. One of our research providers, Argus Research, recently published the following: Over the 1945-2015 span, encompassing 71 years, they identified 27 years in which one party controlled all three branches. For these 27 years the average change in the S&P 500 was 10.0%. That leaves 44 years of gridlock which the average return of the S&P 500 was 7.1%. Maybe change will be a good thing.
As investment professionals we certainly pay attention to politics and the policies that can impact the economy and corporate earnings. These inputs, along with several others, result in our decisions on allocation which is the most important aspect of investing. The results of this election have not changed our view that equities should be over weighted and this bull market we have experienced for the past 6+ years has room to run. This view is based on the fact that we will remain in a low interest rate environment, corporate earnings are showing signs of revival and the consumer remains strong and confident. We will continue to focus on fundamentals and work diligently to ensure portfolios are allocated in alignment with our view but most importantly our clients’ goals.
About Caldwell Trust Company
Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently manages over $850 million in assets for clients throughout the United States. The company offers a full range of fiduciary services to individuals, including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.