Our Experts Weigh In On The Election
Well, it’s finally over. Tuesday’s election was one for the ages. Few people saw this coming, but Donald Trump will be the next President of the United States.
Whether Trump was your guy or not, you may be feeling uncertain about how the incoming administration will affect the market and your portfolio. But you may remember something I recently told StreetAuthority readers:
“I’ve seen some otherwise-smart people whose opinions I respect say things like ‘If Trump gets elected, the market will crash’ or ‘If Hillary wins, the economy will tank.’
Such talk is nonsense. The reality is that the market may get volatile around Election Day, yes, but the chances of it crashing are low.”
You may also remember that I cited a recent survey by the Wall Street Journal which found that economists project a 60% chance of a recession within the next four years regardless of who is elected.
That still stands today. Frankly, this should concern you more than whether or not your candidate won on Tuesday. Nevertheless, this election does have implications for both the economy and your portfolio.
Our experts recognized this, too, which is why they weighed in on the election and the ensuing market action in special alert emails sent to subscribers last Wednesday.
I’d like to take this opportunity to highlight some of their perspectives — and the lessons we can learn — in today’s issue. Below, I’ve included excerpts from our editors along with my own commentary.
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Volatility Can Create Second Chances
Let’s begin with Jimmy Butts, Chief Investment Strategist of Top Stock Advisor. As Jimmy pointed out, when Donald Trump’s presidential bid became a reality late Tuesday, U.S. stock futures plunged. That’s not so much of a comment on Trump as it is the market’s hatred of uncertainty.
As a result, S&P 500 futures fell 5%, hitting a limit designed to halt further drops. Dow futures were down as much as 900 points at one point. To put that into perspective, the Dow fell 640 points after the shocking UK Brexit vote in June. But as Jimmy states below, this volatility has created a second-chance for investors to get in on one of his absolute favorite picks.
“You may recall in yesterday’s alert that I commented on how the election has had a major effect on the Mexican peso. That currency plunged as much as 12% against the U.S. dollar Tuesday night.
But as with most knee-jerk market reactions, by the time the market opened, most of the losses had been recovered.
However, there are a few sectors and stocks that haven’t fared well as the bell opened. Namely health insurance stocks tied to the Affordable Care Act and stocks tied to Mexico… including our very own Constellation Brands (NYSE: STZ).
The drop in Constellation Brands could be a blessing in disguise for many investors. With the stock trading around $153 today, it provides another opportunity to get in below my buy-under price of $157.
Think about it. Just because Trump is president doesn’t mean that people will stop drinking Corona or Modelo or any other one of Constellation’s wide portfolio of products. The fundamentals haven’t changed… only the stock price.”
As Jimmy mentioned, this same logic holds true for his entire Top Stock Advisor portfolio. Each holding is a market leader in its industry, generates enormous amounts of profit, and operates in businesses with competitive advantages like strong brand awareness and high barriers to entry.
“Again, my portfolio is built to weather the storm. It’s currently about 40% cash and the portfolio holdings are not fly-by-night companies. These are companies that will be around for decades to come.”
Despite The Uncertainty, There Are Winners And Losers
My colleague Jimmy Butts also weighed in with a slightly different take when addressing his Maximum Profit subscribers.
#-ad_banner-#One of his top holdings, a medical insurance giant, traded down 8.7% on Wednesday. It makes sense that healthcare stocks took a hit because Trump has repeatedly claimed that he’ll repeal the Affordable Care Act.
On the bright side, banks and insurance stocks saw a major boost from the Trump win, including the major investment houses, one of which is also a Maximum Profit holding.
As Jimmy reiterated to subscribers, now isn’t the time to panic. He’s determined to let the dust settle, stick to his proven momentum-based system, and to let the market digest the election results before he makes any decisions regarding his portfolio holdings.
Stop-Loss Orders Can Save The Day
Switching gears, my colleague Nathan Slaughter, Chief Investment Strategist of High-Yield Investing, planned for the volatility we’ve experienced by placing stop-loss orders on key portfolio positions. The orders were never triggered, thankfully, but it just goes to show how an ounce of prevention can be worth a pound of cure.
Low-Volatility Investments And Diversification Can Help During Uncertainty
This next piece of wisdom comes courtesy of our newest analyst, Genia Turanova, Chief Investment Strategist of The Daily Paycheck.
As Genia told her subscribers, “the morning after” a major event that rocks the markets is always a challenge for investors. Thankfully, shares in the U.S. stock market shook off the negativity and rallied the rest of the week.
“This action — both the pre-market volatility and the strong showing during regular market hours — highlights a few important points about rational portfolio construction and income investing.
At some point in a market cycle, stocks, sectors and market indices are bound to exhibit unfavorable price movements due to factors outside of investors’ control. The best course of action is to know your investments and to evaluate, at every point in the market cycle, whether they are more or less vulnerable to price volatility than the rest of the market. Then make rational, not emotional, decisions.
Bonds, for instance, can do a lot in smoothing portfolio volatility. The Daily Paycheck portfolio has several bond-related holdings that I continue to like…
Moreover, diversification remains paramount.”
A Special Podcast On Angel Investing
To cap off today’s issue, I’d like to feature a new podcast episode from our newest analyst, Joseph Hogue, Chief Investment Strategist of Pre-IPO Millionaire.
If you’ve been following along with us the past few weeks, then you know that thanks to the implementation of new rules, regular investors can now invest in some of the world’s most innovative, game-changing companies — before they go public on traditional stock exchanges.
Simply put, this new opportunity is going to create millions in new wealth for investors. The only question is… are you willing to learn about this exciting new space and be one of them?
That’s why we asked Joseph to partner with us in creating Pre-IPO Millionaire. It’s the first investment newsletter of this kind, dedicated exclusively to this space and chock full of materials to help investors get up to speed.
If you haven’t been following along with our coverage, I recommend you start off with my recent interview with Joseph, which can be found here.
In the podcast below, Joseph talks with Doug Nordman, financial blogger and veteran. Doug retired from the Navy in 2002 and launched TheMilitaryGuide.com in 2010 as a personal finance resource for service members. He’s also been an active angel investor with the Hawaii Angels and has invested in 10 startups over the last decade.
In this episode Doug shares his experience as a pre-IPO investor, and talks about what he looks for in companies and what to avoid. Doug also talks about managing follow-on funding in startups and a strategic investing process to reduce risk and maximize returns.
If you’d like to learn how to join Joseph and receive a charter membership to Pre-IPO Millionaire at a special discount pricing, go here.