While the next few days will be filled with a full analysis and debrief on the US elections, the financial markets are already looking forward to what’s next. We are 1,461 days away from the next Presidential election and I am already reading about how the midterm elections in 2026 are starting to shape up. Rinse and Repeat!
A summary of the landscape in this post-election world; one thing to ignore, two areas to be alert.
- Stocks: US stock markets were up significantly in the overnight hours as the results came in. It is important to understand that a significant amount of hedging is done leading up to events like elections; all those hedges and volatility strategies need to be reversed and can create short-term swings. Remember that the US stock markets were down 5% in the overnight hours when Trump won the election in 2016 and closed the following day up more than 1%.
Recommendation: Ignore. Short-term volatility (up or down) should not alter long-term strategy.
- Bonds: bonds are being sold and intermediate-long interest rates continue to march higher. The chart below is the yield for the 10-year US Treasury note. You can see the sharp move up in the last couple days, but you can also see that the trend higher started when the Fed cut short-term interest rates in September. The 10-Year is barometer for the markets’ view on future inflation, future debt levels for the country, and future growth expectations.
Recommendation: Be Alert. Interest rates are a key factor for all global financial markets
- Legislation & Regulation: Over the next few months, the new administration will be putting together their “100-day” plan and building a team of individuals that will be involved in implementing the strategies. The recommended timeline:
- Fully staff the White House before inauguration (Senate confirmation not required)
- Fill the top 50 agency leadership positions soon after inauguration, with another 50 positions filled by April. This includes all Cabinet members, and leadership teams for the key agencies.
- Fill the remaining 300+ positions in the first 200 days after inauguration. With the GOP also controlling the Senate, the process may move faster than recent experience. President Biden and President Trump (first term) secured roughly 120 nominations in the first 200 days; President Obama got 300 through the process.
Recommendation: Be Alert. I borrow a phrase from President Reagan’s transition team, “Personnel is Policy”.
While it’s easy to get distracted by short-term market trends and big events in the world, a long-term approach allows investments to grow steadily over time, benefiting from compounding returns. A solid long-term strategy, however, doesn’t overlook short-term needs; effective financial planning includes both immediate cash flow management and future goals. Your team at Private Wealth will use strength in financial markets to fund those short-term needs and other financial goals and use weakness in financial markets to invest for future growth to combat the impact of inflation and generate positive real rates of return (after taxes, after fees, after inflation).
Another example of “Rinse & Repeat”!
