Retirement Tip #62: Certainty Equals Opportunity
Good morning and welcome to post-election America!
With all of the hype and drama leading up to yesterday’s midterm election, you might think that the sun wasn’t going to come up this morning…
But despite the dire warnings from both sides of the aisle, life continues. And for most of us, it’s simply “business as usual” this morning.
But what should we expect as investors? Is your retirement still safe?
Let’s take a look…
Forward Visibility and Future Profits
I have to tell you that I’m extremely thankful to have the election in the rear view mirror.
It’s not just the divisive messages that politicians have been spreading and the conflict that our American culture has become accustomed to. The uncertainty in the market has made it more difficult for traditional investors to grow their wealth over the last few months.
Of course, we’ve been looking for ways to put the volatility from the last few weeks in our favor.
After all, buying stocks of quality companies on sale is a great way to get a step ahead of most “buy and hold” investors.
But now that the election results are in, we’re at the beginning of a brand new period for the market and for the economy. One that will give businesses more predictability and will allow companies to expand and hire with more confidence.
You’ve probably heard the phrase: “The market hates uncertainty.”
But did you know that businesses hate uncertainty as well?
When executives don’t know what is going to happen to the rules and regulations that govern their businesses, and to the tax rates they will pay on profits, it becomes very difficult to make long-term decisions.
Uncertainty can cause businesses to delay big decisions until they get more visibility on the opportunities and challenges they will face in the weeks and months ahead.
Uncertainty also leaves investors with a similar conundrum.
You can’t confidently make a long-term investment in a company that hasn’t given clear guidance on how it plans to grow next year. And so uncertainty naturally leads to fewer investors making big decisions. Which in turn leads to lower stock prices.
But today, all of that is in the process of changing.
No, we don’t have a crystal ball to know exactly how the business climate will develop in the U.S.
But we are able to finally analyze the results of the midterm elections. And these results give us a much clearer picture of how businesses will proceed for the next two years.
With Certainty Comes Investment Gains
There are still some questions that investors are wrestling with after the election.
Will the trade war be resolved in a way that benefits U.S. companies?
Will the Fed keep rate hikes steady?
Will profits continue to grow steadily as they have for the last 10 years?
We don’t have the answers to all of those questions today. But we do know how the election turned out. And that certainty is sure to help investors be more confident in starting to put money back into the market.
Over the next few weeks, we’ll be looking closely at how the political landscape will affect our investment opportunities. And of course we’ll be tracking all of the other issues on our radar including oil prices, trade discussions, interest rates, employment and many more.
The thing to remember today is that every time questions are answered and a level of uncertainty is lifted, it opens a new opportunity for investors like us to capitalize on.
Seize the day!!
Here’s to growing and protecting your wealth!