Today is a good opportunity to remind our clients and other readers of the recurring impact on the financial markets of major elections in the US. As we have seen over the past few days, election news and related uncertainties act as a catalyst for short term common stock price movements. But, over the long term, common stock prices reflect fundamental developments at the companies (cash flow, profitability and growth prospects). Presidents come and go, but businesses often persist for decades and even centuries. This is a good opportunity to reflect on these long term drivers and not allow oneself to get emotionally distracted by the ephemeral nature of elections. We craft financial plans and investment policy statements to keep us focused on our goals and to help remove emotion from investment decisions. Make the plan when emotions are steady, and stick to it.
An interesting side note – a commentator on CNBC mentioned on the broadcast Wednesday morning (November 9) that the changes in the futures contract prices of the major stock indexes prior to the market open was less than the change at the morning after the presidential election in 2012 (unverified).
All comments and questions are welcomed.
Bob Bilkie, CFA® & Marisa Bradbury, CFA®, CFP®