The cloud of election-related uncertainty cannot pass fast enough. By the time you get this letter, we will be close to 30 days from the election. Most of the white noise, name calling, intentional divisiveness, and scaremongering will have come to a merciful end. We will know the general direction the country will travel for the next four years. Regardless of who is elected, our objective will be to make the necessary adjustments to our portfolio and seek success.
Where are we now?
Right now there is a clear divergence between the positive returns investors are hearing about and what most investors are actually experiencing. Headlines indicate a positive stock market return for the year; but when we look more closely, we see that many great companies—especially pharmaceuticals, energy, and banks—are not really participating in the heralded headline numbers of 2016.
Where do we go from here?
As Tom Petty and the Heartbreakers sang “…waiting is the hardest part, every day you see one more card...” Every day we count down to when this theater-of-the-absurd election will end. Then we can move into the sectors we want more of and out of the sectors we want less of. There is no need to jump the gun trying to make portfolio adjustments and outsmarting ourselves. All we need is the courage to wait for the election results. We will listen to the newly elected president outline his or her real priorities which often are quite different from electioneering propaganda.
On fixed income and alternatives:
A few weeks ago the Federal Reserve Bank looked into the future and blinked again. They chose to press the pause button again—as I suspected they would six months ago. I am not predicting, but I strongly suspect they will raise rates in December after the election.
We bought some gold last quarter after many years of zero exposure. So far it is a losing position. I think gold is intrinsically a useless commodity unlike copper, oil, and other industrial commodities. We bought gold in anticipation of inflation, but so far I have looked high and low but there is no inflation in sight. Stay tuned!!
What should we look out for?
Are the politicians and the president now the masters of investment winners and losers? Please NO!! But it is wise to avoid companies and minimize exposure to sectors in the crosshairs of Washington politicians. This is especially true now, when people are rightfully upset with companies that unconscionably jack up drug prices 600% without any R&D exposure or banks that open unsolicited accounts so executives can get more stock options.
Yes, a new sheriff is going to be elected but the country is bigger than any president. More and more American businesses and investors will find a way to renew and reenergize the fabric of their businesses—as soon as they get some clarity on who will be the next president. Once they know the ‘who,’ they will supply the ‘how.’ My job is to identify these companies and provide an opportunity for my clients to prosper along with them.
Femi T. Shote, MSF, ChFC, CFP®
Accredited Investment Fiduciary®