The Election & The MarketsSubmitted by Connecticut Wealth Management, LLC on November 2nd, 2016
For much of this year many of you have offered to us in meetings your thoughts on the upcoming election, and on many occasions we have shared laughs about the riotous nature of this cycle’s electoral process. Despite the lighthearted tone of some of our discussions, we take the job of managing your assets incredibly seriously, and it is our duty to see beyond our political leanings and determine how to best position your portfolio based on near and longer term variables. As it relates to the election, despite what you hear on the news or listen to in debates, the impact that a U.S. presidential candidate’s stated policies can have on the markets and economy is historically overrated given that a President does not make laws (Congress does) or set monetary policy (the Federal Reserve does). Instead, the long term trajectory of the market is driven by the growth of corporate earnings. However, that does not mean that there will not be more meaningful levels of volatility in the near term as “headline risk” can influence the market over shorter periods of time. As we have stated before, alongside volatility comes opportunity, so we are watching closely for what we consider to be attractive risk/return tradeoffs on which to capitalize, as well as situations where we feel it necessary to reduce risk and protect your assets.
In addition to watching the election, this is the time of year when we are looking more closely at opportunities for tax savings. Doing so can often lead to elevated amounts of activity compared to what you typically see throughout the year, so if you notice an uptick in the frequency of trading, please keep in mind that this is likely in accordance with our goal of reducing your tax liability to the extent we can.
Lastly, you may have noticed that some of the shifts we made earlier in the year included increasing our exposure to low-cost, index-tracking vehicles. As a committee we have determined that the current environment has been increasingly unconducive to active management outperformance, so as a result we have significantly lowered your investment-related costs. We expect that this trend will continue but, as always, stand ready to adjust if we see a shift in market fundamentals.
Please feel free to reach out to us with any questions.