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As the election results came in last night, it became increasingly clear that the projections hadn’t guessed this one quite right. Most polls had been pointing toward a Hillary Clinton victory, and that expectation was also reflected by the market. As we saw when the Brexit vote surprised investors in June, markets dislike uncertainty and unexpected outcomes. Stock prices initially fell across the world in premarket trading, as the shift to a Donald Trump victory became more evident. As investors began to digest the news, stocks later recovered and volatility subsided somewhat.

Stock prices

In our most recent client newsletter, we shared a few of our thoughts about the historical impact elections have had on markets. In the short term, we said it generally means increased volatility leading up to and immediately following the election – that has certainly played out this time around. Beyond this, we believe the long-term impact of the election is fairly minimal as it relates to most investors.

Despite some of the negative or fear-inducing headlines you may see in the coming days, we urge you to keep the following in mind:

  • Markets price information very quickly

By the time most Americans were sitting down for breakfast this morning, the market had already begun to reposition based on the results of the elections. Some segments of the market were rewarded while others fell. Prices will continue to adjust as more is learned about what this presidency might look like. This is the very reason we diversify and resist attempts to time or outguess the market.

  • Volatility can be a good thing

Because stocks go up and down in the short term and involve more risk than bonds, they command a higher long-term return on investment. In addition, through periodic rebalancing, we diligently look for opportunities to buy things that have fallen out of favor and sell things that have done well. These opportunities don’t exist without volatility.

  • It’s all going according to plan

Due to the frequency in which market ups and downs occur, it’s expected that your portfolio will experience these periods from time to time. The volatility we’ve seen in the past few days is nothing out of the ordinary. We expect and account for these situations within the financial plans we create for our clients.

Ultimately, most investors will have funding goals that span years or even decades beyond Election Day, so we recommend maintaining that long-term focus in order to give your retirement plan the best odds for success. We will continue to monitor the situation and your portfolio to ensure that you stay on track to meet your long-term goals.

Thank you for continuing to see past the short-term noise of the market. We value the confidence you have placed in us. If you have any questions or concerns, we encourage you to reach out to your advisor.