The Head and Heart: Election Thoughts & Feelings

At Longwave, we are dedicated to the care of the world around us. However, our first and overriding mission is the financial well-being of our clients. While our heart may point in one direction, our role obligates our head to separate politics from economics.  

With an election that has been described as the most polarizing of our lifetime, we get how you feel and are here to listen. In fact, my colleagues and I have been talking to many of you about this election for a while. Over the past several months, almost every meeting started with you asking our opinion about the presidential contest. To answer this question, we generally made two points.  

The first is the reminder that while half the country will be extremely upset about the outcome of this election, the other half will see the result as cause for optimism. Our second answer goes back to one of our core philosophies at Longwave which is that it’s nearly impossible to outguess the stock market. The stock market is very efficient in gathering the economic opinions of millions of investors who are voting with their dollars on a daily basis. What we have seen over the past few months is that the stock market has been very stable, with an upward bias. This suggests that Americans were not fearful about the outcome of this election. It’s easy to say the masses are wrong but it’s also very risky to bet against them.

Any time we experience turbulence of any kind, it's natural for our first instinct to be “I want to get off this ride." I have seen personally that knee-jerk reactions are almost always self-defeating. We urge all our clients to avoid making immediate financial decisions in either direction and to allow at least a few weeks to process. Now that the outcomes of Tuesday’s election are generally known, the market will start to synthesize its opinion on what it all means. The first thing we are seeing is that the Dow Jones Industrial Average has leapt over 1,000 points (or around 3%) today. Investors are cheering because they feel the new administration will be positive for business, rolling back regulations and taxes and increasing protections to American industry.

The other side of the coin is the bond market. Bonds are down around 1% which signals that interest rates may be going up in the future, in the event of more stimulus, higher growth, higher inflation, higher tariffs, lower immigration and higher national debt. We will continue to work with you to adjust your financial plan to future developments.

For some, today may be too soon to think constructively about the future as the result of this election is hard to swallow. The potential social consequences of this election are particularly worrisome for many. The way people vote is very personal, and it's difficult when the causes that many find vital, such as the environment, equality and global democracy appear to be marginalized. 

While we do see risks to some of the incoming administration's stated economic policies, Longwave continues to be encouraged by the strong footing that the US is currently on, particularly compared to other parts of the world. Some of this success is due to decisions made by the Federal Reserve. Its governors are the most important captains of the economy and their 14 year terms mean that their decision are generally apolitical. The other reason for the health of the economy is the hard work and ingenuity of ordinary people. This is why many economists believe that elected officials play a public, but generally minor role, in steering the economy. 

While today’s market action is a good gauge of immediate sentiment, we continue to be focused on outcomes much further down the road. Over the past 8 years, we have seen two dramatically different administrations and we did well in both.  

Current unemployment is low, inflation has been falling, net worth and home values are at all-time highs, while consumers continue to spend. It’s simply impossible to predict what the next four years will bring but it is safe to say that we are going into the unknown on solid footing. Our hope is that future prosperity lifts up even more Americans.