How should investors think about the markets after the election?
Clients and investors have been asking questions about the state of the markets and their money, post election. We've done a lot of careful planning and research to position investments for the next two years.2025 is lining up with changes and uncertainty. It has the potential to be one of the most significant tax policy years in the past 30 years. There are potential economic impacts from tariffs, possible immigration impacts reducing the workforce and possible governmental workforce reductions. Inflation could increase, unemployment could increase and the cost of everyday goods could increase. In order to pay for the proposed tax cuts the congress will be looking to trim enormous sums from the budget and entitlement programs. This may nor may not be possible. It's possible the federal reserve will not be able to continue it's rate cuts and may indeed have to pivot to rate increases
Or, like in 2016, the Chinese could adjust their currency to mute the effects of tariffs. Also, in2016 Chinese imports accounted for approx. 21% of imports, now that number is closer to 13% (source Eaton Vance, division of Morgan Stanley). The immigration and deportation measures could end up being much more limited in scope.
All of this could create significant uncertainty, which makes forward planning challenging. The timing of all these factors is also hard to predict. However, we believe we are entering a pro-business environment, with likely reduced regulations and increased mergers and that the market still has room to grow in the short term and that any negative effects from these items will be Q4 of 2025 and into 2026
Our thinking is focused on an investment strategy that is positioned to capture short-term growth, while being nimble enough to pivot toa new strategy when either the opportunity presents itself or then market conditions require (mid to late 2025).
The Simple Wealth strategy is further focused on industries that may be insulated from future negative influences while capturing the growth in sectors that may benefit from likely future changes. In my analysis, this is tech, financials, healthcare, oil and gas, and a few high-income strategies, while avoiding utilities, staples, retail and auto. Emerging markets like India and Vietnam show promise to benefit from tariffs on Chinese goods, and many manufacturers have already been moving their factories. Some Chinese factories are opening shell operations in Indonesia to avoid the "Made in China" tariff(https://www.economist.com/briefing/2024/08/01/chinese-firms-are-growing-rapidly-in-the-global-south).
For example, a short term nimble strategy (think 4-12months) we like a low cost ETF strategy with QQQ (tech), COWZ ("Cash Cows" think of this as an S&P500 fund but only the companies with the strongest balance sheets), ENFR (oil and gas), VFH (financials), VHT (healthcare),ISPY (this is a daily covered call strategy generating nice cash flow). These are examples of a short-term strategy and not a specific strategy recommendation.
