A day or two after the election someone (not a Trump fan) asked me about selling out of the market as they apparently thought the market would go down. This is a great example of something that repeats over and over in the market and the thought process of market participants.
Before the election there was a widely accepted view that a surprise Trump win would be bad for the market. This was partially validated by that quick crash that occurred over night on November 8th. Of course, the crash snapped back very quickly and the equity market’s immediate reaction has been positive. Maybe that will change or maybe not but equities did not exhibit fear in the first few weeks.
Markets do the “unexpected” all the time and this might be what has occurred here. Certainly, there will be instances in the future where one outcome seems certain but then the opposite will happen. This is exactly why having a disciplined investment process that you can stick to is so important as opposed to guessing as to whether some event, like an election, will be good or bad for markets.
If Trump turns out to be bad for equities, the market will do what it always does. On its way to down a lot it will first go down a little and breach its 200 day moving average or have a death cross (50 day moving average crossing below its 200 day moving average) or some other widely known breach that precedes large declines. From that standpoint, this event is no different, no event is different. As a reminder, history shows that fast declines tend to snap back quickly, it is the slow declines that have done more damage. Even after the crash of 1987, it took less than two months for the market to bottom.
To be clear, the reasons are always different but the market behaviors aren’t. Stick to your process and don’t try to guess.