Wow, last night’s election shocked nearly everyone, with Donald Trump beating Hillary Clinton in a hotly contested race.
I won’t go into a heavy political analysis. I’ll leave that to the politicos. Instead, I want to look at the election and how the professional pundits once again missed the undercurrents that foiled the consensus once again.
Brexit wasn’t supposed to happen. Trump’s win wasn’t supposed to happen. And stocks weren’t supposed to rally in the wake of a Trump win.
Brexit produced a sharp, two-day selloff before shares quickly and unexpectedly claimed new highs. A Trump win was supposed to produce a Brexit-like reaction in shares.
It did, but you had to be a professional investor glued to your PC or a Bloomberg terminal to catch it.
Brexit light
Tuesday evening Dow futures plunged about 800 points when it became clear that Trump was on the road to victory. But a curious thing happened. Futures began to cut losses. Shares, which experienced some initial uncertainty at the Wednesday open, finished the day with big gains.
So much for the consensus, which I must concede, I had bought into.
Market timing and the fundamentals
That said, today’s market action favors a well-crafted, long-term investment plan rather than the helter skelter of market timing.
If you went to cash in anticipation of market volatility, you missed out on today’s rally. The same can be said if you sold out in the Brexit selloff.
I won’t predict what may happen in the days and weeks ahead. Who can accurately and consistently predict the future? No one.
What I know is the fundamentals that have historically driven stocks higher over the long term remain in place.
Ironically, President Obama may have summed it up best on Tuesday evening when he said, “No matter what happens, the sun will rise in the morning.” It did.
