Trump market: winners, losers and fortune tellers

Question: I keep seeing that the Dow is way up since Donald Trump won the election. But when I Iook online at my 401K, it’s not really doing anything. I am mostly invested in the stock market in my 401K, so why would there be such a difference?

Answer: Donald Trump’s election to serve as the 45^th president of the United States made history. It has also made for a bit of hysteria.

The same folks that did such an outstanding job of predicting the election’s outcome quickly turned their attention to predicting the election’s impact on financial markets.

It seems a fortune teller’s work is never done.

Markets, and the news outlets that report on them, love a story, so narratives quickly formed about which industries would thrive and which would dive in the wake of a Trump presidency. Within days (hours!), markets had begun to pick winners and losers:

Banks and financial institutions anticipate a Trump presidency will ring in an era of less regulation, so financial stocks have been up since the election.

The talk about rebuilding our national infrastructure has industrial stocks climbing.

And promises to “repeal and replace” Obama Care have made healthcare stocks more attractive to buyers.

For the time being, those are a few of the winners in the post-Trump-victory market.   But there have been losers as well.

Remember that in our economy, everything is connected. So when Donald Trump promises to spend “billions and billions” on rebuilding our “crumbling infrastructure,” markets realize he’s going to have to borrow money to do that. That means the government will have to issue billions of long-term bonds, driving interest rates up. And higher interest rates usually slow down home buying and building activities.

So home builder stocks and other real estate oriented investments have been hurt.

Trump’s tough rhetoric about renegotiating treaties with other nations has done some damage to the stock prices of international companies.

Keep in mind all this has occurred based on about one week’s worth of speculation about the future actions of a man no one would describe as predictable.

To your observation about the Dow, remember that it is a collection of 30 of America’s biggest companies. With names like JP Morgan Chase and Goldman Sachs, the financial sector’s uptick is well represented. United Health and Pfizer are stocks that have benefited from speculation that changes to Obama Care will benefit them. And these two stocks are also part of the Dow.

The Dow happens to be over-weighted with the stocks of companies currently benefiting from Trump-euphoria.

If your 401K really is invested in funds that represent the broad stock market that could explain its recent “under-performance” relative to the Dow.

But my question to you is, “so what?”

Why are you concerned about how your 401K is performing vs. one week’s worth of speculation about a future no one can predict? Are you under the impression that speculation will prove 100% accurate in the long-term?

Ben Graham said, “In the short run, the market is a voting machine; but in the long run, it is a weighing machine.”

Unless you have fortune telling abilities (trust me, you don’t), you don’t know what companies will be winners or losers during a Trump presidency. Or, during subsequent presidencies.

So, even though it won’t garner breathless headlines or be interesting chatter at holiday cocktail parties, consider employing the (boring) wisdom of the ages:

Ignore all the chatter about what’s about what just happened or what’s about to happen.

Invest wisely and widely… for the long-term.

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