Here Comes the Stock Market Knee-Jerk

Sam Wang at Princeton Election is going to be eating a bug, after all.

He’s the poll aggregator who assigned a greater-than-99% chance of Hillary Clinton winning the presidency, who wrote at Twitter on October 19: “It is totally over. If Trump wins more than 240 electoral votes, I will eat a bug.” Bon appetit, Sam.

Donald Trump defeated Hillary Clinton to become the President Elect of The United States of America, a stunning victory for a nominee who was ridiculed by the establishment from the moment he declared his candidacy on June 16, 2015 at Trump Tower in New York City.

We as stock investors will now need to deal with a knee-jerk reaction to this surprise, but it shouldn’t last long, as I explained in last Sunday’s special Election Edition of The Kelly Letter.

I wrote that “the equivalent of Truman beating Dewey would be Trump beating Clinton. The latter is favored to win. A Trump victory would be a shock, and would likely send stocks lower in the short term.”

Indeed, here in Japan, the Nikkei 225 rolled over at 10am our time when it became clear that Hillary did not have it in the bag. The rolling over turned into a steep ramp down that left the index 5.4% lower by the close.

In New York, the S&P 500 and Nasdaq Composite futures both headed toward a 4% decline in pre-market trading.

We’re getting that short-term drop in prices that we knew was a possibility. This can be unnerving for people, particularly given the widespread wringing of hands in the media over what Trump will mean to the world, so I want to reiterate last Sunday’s message:

  • This is just another downward price pressure.
  • It is unlikely to last long.
  • The stock market trend prior to election uncertainty was upward.

Therefore, rather than panic, now is a fine time to:

  • Begin your signal plan to jump on a big discount from this quarter’s price target.
  • Or, stick with your existing plan if you’re already running one.

The signal advised a sale a month ago, ahead of the bulk of this slide, creating buying power for those already running the plan. Should the current discount persist, we’ll be able to put that capital to work in January. If not, then at least we’ll enjoy the holiday cheer of watching a market recovery.

I can already anticipate the most popular response I’ll receive to this message, which is a reply asking whether it would be wise for people already running a signal plan to put more capital into their stock fund right now.

The official answer is “no,” because the plan should be run by the book. However, it will not crater your plan if you really want to take action in this moment and buy some shares of IJR or other stock fund. The plan is resilient enough to get through whatever unfolds.

So, do whatever you want — as long as it’s not selling today. Do not do that. Buying or sitting tight are fine. Selling is not.

I am not worried about the future to any greater degree due to Trump’s victory.

The worries I had prior to the election, I still have. I don’t have new ones. I do not believe he’s apt to start a nuclear war or cause another calamity, as was suggested repeatedly during the campaign. American government includes many checks and balances. Even with a Republican majority in Congress, Trump will run an administration, not a monarchy.

To those who supported Trump, congratulations.

To those who did not, try to find comfort in knowing it’s possible for a complete outsider to violate political convention and win. The mere idea of that is refreshing, regardless of the specific candidates involved.

Don’t let the stock-market fallout get you down. It will pass. Those who buy into it or keep running their plan uninterrupted through it will thank themselves later.

Have a good rest of the week.

Subscribers, I’ll see you Sunday, as usual. See? You can still count on some things.

Yours truly,
Jason Kelly

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  1. Rollo Winegarner
    Posted November 9, 2016 at 10:53 pm | Permalink

    I used to be a long time member of your Letter……several months ago the letter got cancelled, not by me but because my credit card expiration date expired apparently. My other accounts that used this card did not get cancelled but your letter did. My question is I would like to receive the letter again but would want to stay at my previous price….not the new member price. Please let me know back if this can be done. Thank you.

    Rollo Winegarner

    • Posted November 9, 2016 at 11:27 pm | Permalink

      I apologize for this mix-up, Rollo. I’ll get an email to you in a moment.

      Until then,

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