‘Deep breath’ is the best advice for investors after this election

By Adam Candee

Friday, Nov. 4, 2016 | 2 a.m.

Markets love certainty, the axiom holds, and this presidential election offers little of it.

The best most experts can make of it is that a Hillary Clinton victory would do very little to move the market and a Donald Trump win could do just about anything because his candidacy offers little precedent.

“The market perceives Hillary to be more predictable,” UNLV finance professor Daniel Chi said. “Some might say Hillary is corrupt or whatever, but it sees Trump as less predictable. The market abhors uncertainty. It’s OK knowing everything is going to be bad, or good.”

CSN business instructor Brett Winklehake shares a similar opinion to Chi.

“If Clinton gets in, the stock market should stay relatively close to what it is now,” Winkelhake said. “We’d see 1 to 2 percent GDP growth. If Trump gets into office, there’s no way to tell.”

That uncertainty perhaps explains this week’s downward shift that bucks nearly a century’s history of modest election-week gains. Whether Hillary Clinton or Donald Trump wins on Tuesday, the stock market likely will take a slight dip before making a move based on investors’ feelings toward the new president. Since 1928, the S&P 500 averaged a 1 percent dip in the week following the election.

Paul Bennett, a clinical professor of finance and economics at Fordham University in New York, spent 20 years working at the Federal Reserve before becoming chief economist at the New York Stock Exchange from 2001 to 2008. Bennett sees the certainty of Clinton’s track record and policies as better for the health of the stock market.

"If Hillary wins, there will be a small upward bump (of relief) on the U.S. stock market, which has recently gone down a little due to the election uncertainty,” Bennett said. “Hillary is the safe, somewhat conservative candidate favored by most investors and money managers. Foreign stock markets will be helped as well by a Clinton win, for similar reasons.

“If Trump were to win, the market would move downward in negative surprise,” Bennett said. “The probabilities of war and economic uncertainty would rise, pushing down stocks worldwide."

A 2016 Merrill Lynch article on the effects of presidential elections on the stock market showed that election years without an incumbent president running cause a negative impact, with the S&P 500 dropping 2.8 percent on average. When a sitting president is up for re-election, the S&P 500 averages returns of 12.6 percent, compared to 7.5 per year dating back to 1928.

Any specific effect on Las Vegas-based stocks likely would be indirect. A Trump presidency could affect global attitudes toward the United States, said Jeff Reeves, executive editor and analyst for InvestorPlace.com, causing an effect on international tourism.

“Rhetoric matters,” Reeves said.

Chi cites Trump’s own casino business and his ties to heavyweights on the Strip as potential indicators of his approach to gaming-related issues.

“Trump has casino business, and he has a lot of support from (that) local business community,” Chi said. “At least he is perceived to be friendly to our local businesses. He’s more a perceived friend to the gaming industry than Hillary Clinton.”

Most experts cautioned, though, that neither Clinton nor Trump alone can cause the market to surge wildly or crash precipitously.

“The correlation is not that high because we have a system where the president can’t do too much,” Chi said. “The president is not the king or the emperor. Personally, I’m not worried too much about what the next president will do to the stock market.”

Christine Soscia, a financial consultant with Retirement Benefits Group in Las Vegas, concurs with Chi.

“You will always have the naysayers who think if so-and-so is elected, the world will come to an end, you should buy gold and the stock market will collapse. Well so far, that hasn’t happened,” Soscia said. “If you look back over the last 20 elections, investment success wasn’t dependent on which party held office.”

Focus on the long term, Reeves said, and “take a deep breath.”