As Donald Trump emerges as the next president-elect, investors may be wondering: Now What?
We've been asked many questions today including:
Will the new president really build a wall across the border?
Will he introduce new legislation to void the Affordable Health Care Act?
Are the U.S. allies abroad going to have to renegotiate their trade and security arrangements?
Remember, these rapid market movements are almost always emotionally driven and a bad time to alter your investment strategy. We have months before the new president takes office. The markets have plenty of time to settle down between now the first 100 days of the Trump presidency to evaluate whether America's corporations are indeed worth more or less than they were prior to election night. Ultimately, the intrinsic value of stocks doesn't usually change much based on the occupant in the White House.
Another interesting thing to watch is a tax reform proposal in early 2017. Trump has proposed simplifying our taxes down to three ordinary income tax brackets: 12% (up to $75,000 for joint filers), 25% ($75,000 to $225,000 joint) and 33% (above $225,000 joint). The wish list includes doubling the standard deduction with itemized deductions capped at $100,000 for single filers and $200,000 for joint filers. Capital gains rates would be capped at 20%, federal estate and gift taxes would be eliminated and the step-up in basis would be eliminated for estates with assets over $10 million.
However, these proposal were made before anyone imagined the next presidency, the House and Senate would all be under one party's control. The next four years, especially the first 100 days of the new presidency, represent an opportunity for the Republican party to do something more ambitious than simply tinker with our nation's tax law.
So what would tax reform look like? We simply don't know at this time. The goal would be simplification, but the bet is that whatever form it takes will add thousands of pages to the current laws.
The most important thing to remember about how the markets react to the election is that it's all speculative at this point. The very worst thing you could do is make a drastic change to your investment approach during the short term.
Policies and politics can be headwinds for the markets, but strong companies with strong business models and products tend to do well under any presidential administration. We continue to implement our defined risk strategy to protect client portfolios in the event of a prolonged market downturn for political or any other reason.
Feel free to contact us if you have questions or would like to discuss your specific situation. We appreciate the continued confidence and the opportunity to serve you & your family.