U.S. President-elect Donald Trump addresses supporters during his election night rally in New York. REUTERS/Mike Segar

By Mickey Welcher

The Dow Jones futures plummeted more than 700 points on the night of the election, as the surprise of Donald Trump winning became a reality. That’s because the financial sector was betting on a Clinton win. As a Trump victory looked more certain, experts predicted a virtual blood bath for the stock markets the day after.

But it never happened.

While stocks did open lower, they quickly skyrocketed; reversing all losses and are now at all-time highs. Some attribute this to the way President-elect Trump spoke on election night, looking more presidential as he also talked about rebuilding the U.S. infrastructure and stimulating the economy. The Dow Jones, S&P 500, NASDAQ and other indices loved what he had to say, and responded accordingly.

So with the stock market going “all in” on Donald Trump, the question now is should you be as well?  The move last week was very impressive, but we need to take a step back and let things calm down. Current prices for shares are largely based on the euphoria over our President-elect, but what will keep them there will depend much more on corporate earnings and the state of the economy.

So before you sell precious family heirlooms to buy more stocks, take these things into consideration:

  • The Fed will raise interest rates soon. There’s a big Federal Reserve meeting on Dec. 13 and 14, when the central bank is expected to announce an interest rate hike. That will be no real surprise to investors, but it’s what else is said that will count. If the Feds signal that the raise is the first of a series of moves over the next year, there’s a good chance stocks will drop.
  • Corporate earnings haven’t been stellar. We have seen companies reporting lower revenues, with the retail sector being hit the hardest. What’ more, many companies have lowered guidance for 2017 and we need to see a change in earnings going forward.
  • The details of Trump’s plan aren’t out yet. The market welcomes the idea of the federal government spending money to rebuild the infrastructure, but’s its unclear how he’ll pay for it. President-elect Trump has also stated he wants to lower taxes while also increasing spending for certain projects. The real question is how will the new projects get funded without raising deficits. Only time will tell.

Studies have shown that rallies after an election have zero correlation to market moves the next year. So for now, stay steady and don’t make changes. The current rally could continue through year’s end. Then re-evaluate in 2017 based on some of the information discussed above.

For those of you that aren’t in the market yet, this could be a good time. Just be sure to have a properly allocated portfolio that helps you navigate over the speed bumps that are on the horizon.

Mickey Welcher is founder of Envestim, a low-cost financial advisory firm for anyone looking to start or manage their portfolio. He can be reached at mickey@envestim.com.

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