Post-2016 Election Communication
- Peter A. Johnson, Chief Executive Officer and Portfolio Manager
The outcome of the U.S. presidential election came as a surprise to just about every analyst, pollster, and political expert. But perhaps it should not have—as demonstrated by Brexit and emerging political movements in Europe, it is becoming clear that citizens in developed countries are increasingly viewing globalization a threat to domestic interests, particularly jobs and security. Governments have failed to adequately explain the long-term benefits of trade and globalization, and these economic theories (and the governments themselves) are being upended as a result.
Our message, as always, is not to panic and to make informed decisions when the information presents itself. The last 24 hours have been a period of extreme uncertainty and uncertainty tends to cause investors to sell first and ask questions later, and this case is no different. There are many who sold in the middle of the night under extreme duress and cost themselves 6% by the time the market had closed this afternoon. As we have seen countless times before—fiscal cliff, sequestration, Brexit, and now with the surprise Trump victory—markets are very capable of absorbing political shocks. The outlook for global economic growth and corporate earnings is what matters at the end of the day, and neither outlook changed overnight.
Republicans now control the White House, Senate, and the House of Representatives, thus giving them the mandate and the structure to legislate. We expect meaningful policy changes going forward. Governing is much more difficult than campaigning, however, and winning candidates often discover within the first few months that the reality of implementing policy is messier and more complicated than they estimated when formulating their proposals and making promises on the campaign trail. When finally implemented, policies often turn out much differently than the candidates had envisioned, which is another reason we believe it makes sense to remain patient and watch closely as policy measures are set forth, negotiated, and executed.
In spite of this uncertainty, we continue to believe that the underlying fundamentals of the U.S. economy remain, and that the beauty of our country is that its strength lies with the collective, rather than the individual. Our priority today and always is to manage portfolios pursuant to long-term objectives, so it is our job not to get too caught up in the emotional fallout of this election result. Our mandate from here is to flexibly respond to policy changes as they become evident, to capitalize on the opportunities that policies create, and to minimize risks where we believe new policies can hurt.
The opinions expressed herein are strictly those of Ashfield Capital Partners, LLC and are subject to change without notice. Information has been obtained from sources believed to be reliable however there is no guarantee of its accuracy