November 6, 2016
First, here is a resource that may useful – www.vote411.org. This site will allow you to learn more about the issues and candidates not only on the national level but in your own community. I hope it helps everyone make a more informed vote on Tuesday.
Given the uncertainty heading into this years election, I thought a look at the Recession Probability Indicator (“RPI”) might be appropriate given that a Trump win, while a long shot according to pollsters, seems likely to stir up some short term market volatility.
A reminder – the RPI does not forecast recession – it is designed to indicate when we are already in it. Historically, it’s been accurate about 80% of the time and if you’ve visited the RPI page on DakHartsock.com you know even that limited accuracy could have a serious impact on your investments. CLICK HERE if you’d like to see the RPI in action. Make sure to scroll down to the tables.
The RPI is steady as she goes. No changes in the last few months, and we are still motoring along comfortably at 12. This is subject to change at any time, but for now investment still appears to be a better bet than not investing.
Given we do not currently appear to be in recession, any sell off following the election represents a buying opportunity for all but short term investors.
If you are fully invested, there is no reason to let whatever short term reaction we get from the market post election to keep you up at night.
Predictions are generally best left to fools and politicians, (wait, I could have just said politicians, right?) and so this isn’t a prediction, it’s an a simple educated guess: If Trump wins, my view is that the market will be taken a bit by surprise and we will see a sharp, Brexit style sell off.
I also think that more clear minded buyers will step in before things get too scary. My guess at this point is that a Trump victory could spark a 6% – 12% sell off.
There is another X factor out there that does have the potential to muddy the waters and make my guess look stupid. On December 4 Italy will decide whether to restructure it’s government. The current prime minister has said he will resign if the referendum fails. If the opposition takes power, a referendum on staying in the EU will likely occur shortly after. If Italy votes to exit, the markets are likely to sell first and ask questions later. The European Central Bank has helped Italy stabilize by purchasing it’s bonds. That could result in more than a little acrimony.
Regardless, investing is about WHAT IS, not WHAT IF. All of these outcomes present opportunities for prepared investors, as long as the US stays out of recession.
As always, feel free to reach out with any questions. Please share with one friend that can benefit from this information. Share buttons below.
To Smarter Investing,
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.