If you were paying any attention during election season late 2016, you know there was nothing but negative press around the markets. It was political fuel to disrupt the election and place doubt about what the markets will bring in 2018. The most outspoken and publicized of them all was Mark Cuban’s comments when he said, “In the event Donald wins, I have no doubt in my mind the market tanks.”[1]
Negativity for political gain has always been common but with all the political banter and uneasiness about the presidential election, no one would have predicted a 25+% run-up in the S&P500 in 2017.
So, what will the markets bring in 2018? No one knows for sure but if we have learned anything from the last 2-3 presidencies, it is the importance of preparing and continually adapting to change. Regardless of the media attention feeding negativity, we have to keep our attention on what is actually happening, adapt and be proactive with our decisions.
Unless you have been unplugged for the last month, you know there has been some discussion around taxes. Congress surprisingly was able to come together and actually pass a bill that brought about a major tax overhaul. This legislation has brought about more confidence in the economy, which has the potential to continue the momentum of the stock market into and through 2018. This bill included corporate tax cuts, which means more money on the move that can bring expansion and employment.
The FED also plays a big role in what 2018 will bring. Rising interest rates can put the brakes on expansion as it becomes more expensive to borrow money. The FED feels good about the economy, which puts added pressure on the need to raise rates.[2] We all need to be keeping an eye on rates, which could slow the momentum of stocks.
President Trump signed an executive order requiring that for every new regulation an agency puts in place, they are required to repeal two already on the books. This policy of deregulation has spurred confidence amongst corporations and small business, which has continued to fuel spending, hiring, and expansion. As regulations continue to be unraveled, we can see more confidence in business growth. All of this benefits the markets and investors.
There are many other factors that contribute to the economy and the stock market. You can learn more about the areas we are keeping an eye on here.
While there is a lot to feel confident about, there is also caution in the wind. The experience we had coming out of the 1990’s into the 2000’s is not too far in the rearview mirror.
To spur your memory a bit, in the 1990’s it seemed nearly impossible to not make double-digit returns on your investments. Confidence was through the roof and investors acted as if their portfolios were invincible. Then January 2000 brought a sell-off followed by a terrorist attack then the mortgage meltdown. What followed the roaring 90’s was a dismal and at times depressing decade of volatility, uncertainty, and frustration.
Now, here we are in 2018 with a market that can’t seem to lose. Sound familiar?
What will 2018 bring? I don’t know for certain and neither does anyone else. No one knows what the future holds and trying to predict what’s next is a fools game.
However, I can tell you with confidence that the key to investing is to not get too caught up in the present. If you’re going to invest you have to realize that there will be good times and there will be bad times. If you can’t stomach the idea of losing money then you should not be investing your money.
Diversification can help soften the ups and downs of the market roller coaster but nothing can eliminate it. So, using different asset classes, various products and having a long-term view of your portfolio is the only way to spread your risk.
To be clear, using different assets classes will mean that you will likely always have good performing investments and poor performing investments in your portfolio. Unless you have a crystal ball this cannot be avoided since the whole idea around diversification is to offset risk.
Navigating all the noise, products and salespeople can be tricky and at times intimidate. If you have a question about how to diversify and not chase returns let me know. I am happy to offer my opinion.
Good Luck!
Brian
The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation. Kalos Capital, Inc. does not provide tax or legal advice. The opinions and views expressed here are for informational purposes only. Please consult with your tax and/or legal advisor for such guidance.
[1] http://fortune.com/2016/09/07/mark-cuban-criticizes-trump/
