It’s been a little crazy post-election. The stock market has gone way up. The bond market has gone way down. It reminds me a little of the Brexit aftermath. When the Brits voted to exit the European Union, the market immediately dropped dramatically. “We’re going to see the collapse of the English economy,” was the gut response. “Britain is the Wall Street of Europe. What happens if its banking system collapses? We’ll have a recession and it could spread…” and so on. But the market recovered very quickly. Why? Nothing happened. Brexit won’t take place for another two years.
I think our post-election’s reaction is similar. The market reacted instantaneously to Trump’s victory. The bond market basically said, “Oh my gosh, Trump is going to implement infrastructure spending and lower taxes, and the economy is going to grow by three or four percent. That’ll be inflationary, so the feds will raise interest rates—oh no!” All this worry caused the most extreme drop in the bond market in nearly 70 years.
But I think this is overkill. Trump can’t just implement everything he wants. He has to go through a process. Yes, his ideas are growth-oriented. I'm actually quite optimistic that they will accelerate the growth of the economy, and that will be good for the market. But I think that will happen over the course of time. In the meantime, it would not surprise me in the least if bonds went up and the market went down to compensate for their overreactions. If those corrections occur, it could be an opportunity to buy stocks and sell bonds. That said, I don’t suggest taking any action right now; that would be trying to time the market and that’s not a good idea. And if you do decide to buy or sell in the future, please don’t do it yourself. Chances are that you will not do it properly. Work with a financial advisor.