The Big Pullback: Instructions for November 9th

The Big Pullback: Instructions for November 9th
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Hold on; it’s going to be a bumpy ride. As I watched the November 8, 2016, Presidential election results slowly come in, another set of numbers took my attention. Around 10:00 pm, the U.S. stock futures dropped almost 700 points as the gap between Hillary Rodham Clinton and Donald Trump widened in favor of Trump. This sharp decline was caused by two major issues. First, the U.S. markets favored a Clinton win and essentially, “priced it in.” Second, the future of the global economy, given Trump’s stance on controlling immigration and raising tariffs on trade, are most likely decisions that will hamper global growth. Before the Futures numbers, economist findings point to an immediate market sell-off in the event of a Trump win. This sentiment is echoed by the chief investment strategist for global bonds and foreign exchange at Prudential Fixed Income, Robert Tipp stating, “Right now, the markets are heading for the hills... ." He called the market’s downward movement a result of fear and fact.

De Ja Vu, we’ve been here before...

The U.S. Markets surged Monday ($DJIA +371), and continued to improve Tuesday ($DJIA +73.14), after the FBI cleared Clinton of wrongdoing in handling classified emails during her tenure as Secretary of State. This movement signaled that the market wanted, and essentially priced in, a Clinton win. We’ve already seen a major drop the market this year after underestimating a vote. Craig Erlam, senior market analyst at Oanda, shared, “Back in June, the markets had all but priced in a U.K. vote to remain in the EU, this time it was a similarly favorable market outcome that traders were banking on—a Clinton victory—and it seems that once again, they may have got it wildly wrong.”

What [is] the future[s] telling us?

I can only speak on the markets. Typically, U.S. index futures prices are a good indication of the market’s opening direction. Around 11:30 p.m. Tuesday evening, Forbes reported that U.S. stock futures plunged, with futures on the Dow Jones Industrial Average falling 792 points, or over 5.1%. When the markets open at 9:30 am on Wednesday morning, looking at stock futures, one should most certainly anticipate a pullback from earlier this week. These losses could be increased by massive sell-offs of institutional investors as they seek shelter from an uncertain market.

DO NOT PANIC and SELL TODAY

Your 401(k), 403(b), and other investments will show RED. This RED may continue for a few days while the market tries to “find itself.” That’s ok. If you sell today, you will violate the first rule of the market, Buy low, sell high. You should be in the market for the long term. You might want to consider over these next few days some companies to buy with solid financials will most likely be on “sale.”

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