Dividend Ten

Freelance & personal finance journal

Stock Talk

The Next Few Days Should Be Like Brexit on Crack

Trump just pulled off arguably the biggest deal in history.

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And in so doing, it’s clear that the British song of nationalism has just come crashing over to American shores.

What to expect from the market in the next few days

We’re already seeing futures down 750 points in after hours. And the peso is crashing.

The market needs time to process what this all might mean and render a collective verdict.

In the short term that means fear & declines.

Ultimately though, like how Brexit played out in June, I think things will turn out mostly just fine, and the market will again rally higher, buoyed by a lower chance of an interest rate hike in December, and proving this time period to be just another nice fire sale.

So think of the next few days as essentially our version of Brexit. But more potential to the downside.

So here’s the deal

The market is going to be fine in the long term. And maybe even in the short-medium term.

Many of Trump’s policies are extremely friendly to business and the economy.

Like getting rid of Obamacare and reducing corporate taxes.

In the long term, this should have a stimulative effect on the economy.

What people are freaking out about are the impacts of policies like:

  • Retributive tariffs against currency manipulators (ie. a 45% tariff against China for currency manipulation)
  • Retributive tariffs against companies that move jobs out of the country (ie. a 20% tariff on Ford until they move their jobs back in the country)
  • Ripping up NAFTA and of course not signing TPP

Ultimately, however, Trump is a businessman. And that means he’s a free trade guy.

Just like in the art of the deal, he’s going to negotiate with other countries new deals that will be in our benefit, and use tariffs as threats for leverage. And in the end, if we do slap tariffs on countries, it will be done to wring concessions, and end us on the better side of the deal for free trade in the long term.

My plan of attack over the next week

As always, everything I say about the future could be completely wrong.

But it’s clear that the market tanking in the short term is in the cards at least. (EDIT: 11/11/16 – Just goes to show, we never can know what will happen!)

Think of it like a Walmart sale. That’s good news for the long term investor.

So here’s my plan of attack for the next week:

1. Remember that slow and steady wins the race
2. Use declines as opportunities – Don’t jump in too soon, aim for 10% correction or more (if lucky)
3. Buy companies on my watchlist as they go on sale.

That’s all. Pretty simple. Now I’ve been up all night watching the events unfold, and since I’m not sure what I’m typing anymore, it’s off to bed.

What say you? Are you looking forward to a Trump presidency and making America great again? Or do you think we’re standing on the precipice of the end of the world as we know it? Are you going to use volatility to buy? Or are you selling? What’s your plan?

4 Comments

  1. The change in outlook has been pretty amazing. DJIA futures were -850ish last night, when I woke up this morning -250, DJIA opened +50 over the first 30 min of trading. Talk about a yuuuge swing and really goes to show how betting on short term movements is HARD.

    My general outlook is to still be patient. Even if we did get that be 850 pt drop for the DJIA all it would have done was taken the market overvalued to slightly less overvalued. I’m in the process of getting my 401k rollover invested so I’m playing it by targeting 10%+ downside protection via selling put options that can generate at least 5% preferably higher premium yields if they aren’t executed. I opened 2 positions today, but want to take a more measured approach to getting it invested or at least exposed via put options. Better values lie ahead.
    JC @ Passive-Income-Pursuit recently posted…Considering Realty Income? Consider Your OptionsMy Profile

    • Greg Gee

      Hey JC – I think the way this played out goes to show – we can never know what will happen!

  2. Quote: “1. Remember that slow and steady wins the race
    2. Use declines as opportunities – Don’t jump in too soon, aim for 10% correction or more (if lucky)
    3. Buy companies on my watchlist as they go on sale.”

    Man, I was ready with my $50K only to see no buying opp there, but I’m not complaining about $1x,xxx increase in my portfolio to day. That was a little bit surreal, but at the same time it was understandable as too many people have too much cash on hand waiting. So, the market might have been oversold since the the DOW high at 18,800.

    I’m going to take your advice too, stick to the plan, wait for a 10% correction or more before buying.

    • Greg Gee

      Hey Vivianne – Ha yes indeed. I just saw a 28% bump in NVDA today. And this whole post goes to show, we never know what will happen. Best to just stick to the plan. 🙂

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