Hinman Connects Blog

History Repeats Itself: Doing Nothing is an Investment Decision
Posted: 1/23/2017

It was four years ago when we explained to clients, “With the election over, believe it or not, we still face more uncertainty.” That sentiment continues to ring true today. Since the Nov. 8th election, we’ve greeted every morning with a new article about the changes now-President Donald Trump and a Republican-controlled Congress may affect. Right now it is all speculation and campaign promises.

Just before Thanksgiving, a Texas judge blocked the Dec. 1 rollout of the Obama administration’s overtime rule. The Department of Labor intended to raise the salary level at which hourly workers would be paid extra for overtime work. There is plenty of hearsay that Congress will nix the rule altogether. This rule greatly affects how both small businesses and large corporations manage their payroll budgets.

There is also Social Security. During the campaign, Trump promised seniors would receive the benefits they’re due, but has no direct plan to address the program’s funding shortfall. This could affect nearly 60% of seniors currently relying on their benefits for at least half their income and the nearly 10,000 baby boomers that retire daily. The President has also spoken about eliminating the Dodd-Frank Wall Street Reform and Consumer Protection Act, which affects how banks operate. There is also speculation on the future of the “fiduciary rule” that would apply to individual retirement accounts as well as 401(k) rollovers. Let’s not forget, the Affordable Care Act’s future hangs in the balance.

That is a lot of uncertainty for our economy. However, remember, the market is forward-looking, meaning it is anticipating future business conditions. At this time, financial markets are signaling better times ahead, which makes sense, given the recent history of financial regulation and tough talk on business in general, coupled with no signs of change in tax policy and signaled health care changes. In the days that have followed the election, stocks rallied 4.98% as measured by the S&P 500 Index (Nov. 8, 2016 through Dec. 31, 2016). Still, with our current bull market that began in March 2009, there is a good chance we will see a bear market—a drop of at least 20%—during the next administration.

Since no one can predict the future, your best choice is to stay the course. Keep the money you need within the next 10 years in fixed-income investments held to maturity to protect principal. Invest money you do not need within the next 10 years in the stock market for growth. Rely on the criteria for your purchases and sales that you have established. When a stock’s price is plummeting, examine the company to see if any events have triggered your sell criteria, such as a change in the company’s long-term fundamentals, a change in the company’s business model or management structure, or a change in the company’s financial strength. Likewise, when the market is rallying and you don’t want to miss the big jump, realize that by the time you see these big market moves, they’ve already happened.  If an investment choice does not fall within the guidelines you set forth, it may be an inappropriate decision for your portfolio.

Sometimes, your investment decision should be to do nothing. You are not ignoring the market, you simply came to the conclusion you may not need to do anything differently.

William G. Lako, Jr., CFP®, serves as a principal at Henssler Financial. Shawna L. Theriault, CFP®, C.P.A. is a Managing Associate at Henssler Financial, specializing in assisting high net worth individuals, families and businesses in tax, financial and estate planning. Both Lako and Theriault are CERTIFIED FINANCIAL PLANNER™ professionals. Founded in 1987 by Gene W. Henssler, Ph.D., Henssler Financial provides solutions for individual, corporate and institutional clients that incorporate a range of services, including wealth management, financial planning, tax preparation and consulting, small-business retirement planning and estate planning.

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