Collective Wisdom

Jonathan Clements

FORGET YOUR political persuasions. Forget health care, terrorism, Roe vs. Wade, the environment, education, women’s rights and voting rights. Instead, focus solely on the economy and markets. Should a Trump presidency affect how you manage your money?

No doubt about it, there’s a temptation to act—and I’ll admit to three modest portfolio changes. In recent months, I’ve invested more in funds that own gold stocks, inflation-indexed Treasurys and foreign stocks, especially emerging markets. But none of these would count as a major portfolio change, all were designed to improve diversification—and, I like to think, I would have made all three adjustments, even if Trump hadn’t been elected president.

I have heard of others who have made far more radical changes, everything from abandoning the stock market to buying homes abroad. At one level, this is understandable: When the world seems unhinged, doing something feels a whole lot better than doing nothing.

But that doesn’t mean it’s wise.

Yes, there are many reasons to be worried. The White House’s apparently chaotic decision-making and President Trump’s blistering tweets create uncertainty, and neither businesses nor investors like uncertainty. Free trade and immigration are good for economic vitality, and we’re likely to see less of both. Infrastructure spending and tax cuts should hasten economic growth, but they may also reignite inflation.

None of this, however, is news. Investors are fully aware of these issues. For three months, they have been wrestling with the implications of a Trump presidency. You might believe that stocks are too expensive and bond yields are too low—and I have some sympathy with those views. But many others have also pondered valuations and interest rates, and they have cast their votes with every buy and sell that they’ve made. The result is the prices we have today. It would be arrogant, and likely foolish, to imagine that any of us knows better than the collective wisdom of all investors. What’s the right price for stocks? The odds are, it’s the current price.

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