Nearly eight weeks after his election, emotions about President-elect Donald Trump continue to run high.
There’s no doubt that Trump was a divisive candidate, and he is already saying and doing things that have pleased some and discouraged others. But as investors contemplate the next four years under this president, they should pay attention to facts and numbers and be on guard against emotional decision-making.
It’s common for investors to overestimate the impact that Presidential election results have on investment markets. Prior to the election, many commentators predicted a market crash in the event of a Donald Trump victory. That didn’t happen, of course; to the contrary, the market has risen. That’s an example of the strength and adaptability of the markets: They have a long history of digesting jarring and unforeseen events, and then moving forward.
There are few things that we Americans get worked up about as much as presidential elections.
One candidate, some of us feel, would be a disaster for the country, while the other would lead it in the right direction. That seems to hold true every four-year cycle, but this year emotions are pitched especially high. Spurring us along is the financial news media, which breathlessly advises us about how to invest for a Clinton presidency, or a Trump presidency.
Thus far, the 2016 presidential race has been nothing short of surprising. It has been laden with controversy and criticism. With a victory in California, Hillary Clinton is the clear democratic nomination frontrunner. Donald Trump, the only Republican candidate left in the race, has won enough delegates to clinch the GOP party nomination.
While the outcome of the election is still months away, history suggests the markets respond far better to a predictable outcome. Markets hate uncertainty. Investment managers will seek clarity over the coming months by looking carefully at the economic proposals of each candidate. For example, markets might respond well to a reduction in the corporate tax rate, a bullish economic indicator. Party affiliation does not offer much insight into strong or weak performance of capital markets. We can look back to times when markets have performed well under both parties.
The presidential election is coming up in less than 6 months and even though it is still too early to know what party will control the White House, we have been asked many times by clients “How will the election change the tax code and the financial landscape?” This article is not about any preference as to what party wins, but what changes in the tax code may be proposed based upon whether the Republican or Democratic Party winning. Some of the high level changes from an individual filer perspective that have been proposed by the present leading candidates are detailed below (http://taxfoundation.org/)