It appears that the media and the market got it wrong again when it came to the outcome of a critical election. As of this evening, with the outcome of the U.S. presidential election still not finalized, but looking likely that Donald Trump will be the victor, the markets are selling off dramatically.
Incredibly, we have been here before following the surprise “Brexit” vote outcome in Great Britain this past June. Markets swooned in the near term, but eventually and quickly recovered their losses as the market realized the underlying fundamentals of the economy remained strong and that high-quality businesses would continue to grow their earnings.
It is our belief that over the longer term, the outcome of the election, whoever does win, has little to no impact on the economy. What ultimately determines stock prices is the ability of businesses to grow their profits and increase their intrinsic value. With the corporate earnings season nearly completed, our analysis indicates that the businesses you own continue to do just that and their ability to increase earnings over time will be little impacted by tonight’s electoral results.
As we repeatedly advise and reiterate in our communications with you, during times of market volatility, it is critical to remain focused on your long-term financial goals and not allow event-driven market volatility to trigger emotion-driven decisions. We continue to advise this course of action.
Please do not hesitate to call if you would like to discuss your individual situation.