Today’s US election is probably the biggest and most uncertain election for many years. I haven’t touched my share portfolio ahead of this potentially seismic event, and I don’t expect to do so afterwards. Let me explain why.
Brexit on steroids?
Over the last few weeks, we’ve seen US stock markets rise and fall in line with Hillary Clinton’s polling numbers. Even Monday’s UK market rebound seemed to coincide with the news that Mrs Clinton had been cleared of any email-related wrongdoing by the FBI.
The implication seems to be that if Donald Trump wins, markets could crash. June’s UK referendum sell-off could look trivial in comparison.
The problem with this argument is that I’m just guessing. There’s no way to know what the outcome of the election will be, or how markets will react. It’s also worth remembering that what happens in the stock market tomorrow is likely to be a short-term reaction. As we’ve seen with Brexit, the picture could be quite different by the New Year.
That’s why I’ve decided to base my investment plans on the facts I do have, and leave the guesswork to the 24-hour news channels.
Are you happy with your stocks?
If you’re still unsure about whether you should have sold any of the stocks in your portfolio ahead of the US election, then the first question I’d ask is whether you’re happy with them.
Are the companies in your portfolio reasonably valued and performing to plan? Do they fit with your overall investment strategy, whether it’s growth, value, or income? If the answer to these question is yes, then I’d sit tight and do nothing.
Whatever the outcome of the election, the world will keep turning. Political changes usually come slowly and are often flagged up well in advance. There will probably be winners and losers in the months ahead, but you’ll still be able to buy or sell shares once the facts are known.
There’s still one big question
Politicians are often accused of failing to keep the promises they made on the campaign trail once elected. A more charitable way of looking at this is that once in power, politicians have to compromise in order to get things done.
Today’s election is a good example. I suspect that whoever is elected president will find their freedom to make dramatic changes limited by both financial constraints, and the opposition or support they receive from Congress.
I’m still slightly worried
The Brexit sell-off was followed by a powerful stock rally in many sectors of the market. My portfolio is worth more than it was at the start of June. As we head into the end of the year, I am — naturally — keen to hold onto these gains.
However, selling now to protect my profits would make no sense. I’d have a load of extra trading costs, and might end up having to pay more to buy back my stocks. In the meantime, I could miss out on dividends, takeover bids and big rallies.
In my view, there’s no option but to sit tight and do nothing.