The steady diet of headlines pouring out of the Trump administration has been unsettling for most Americans, regardless of where they sit on the political spectrum. Most of us want to see our president succeed, irrespective of who is in office.
At this juncture, you’ve probably heard from clients who are asking how recent worries may impact stocks.
We know equity markets loathe heightened uncertainty, and what is happening in Washington is generating an enormous amount of political uncertainty, not only for the president’s pro-investor agenda, but whether he will serve out his four-year term.
Yes, the word “impeachment” has been bantered about in conventional circles. And it was responsible for a one-day selloff in the middle of May.
But, the political uncertainty has yet to generate economic uncertainty. Where am I going with this? Please follow along with me.
Handling client inquires
First, avoid going into the political weeds with clients. We all have opinions, but few of us are seasoned political analysts.
Even if you and your client are on the same political page, it’s likely that he or she will dot the i’s and cross the t’s a little differently then you. So why even wade into the that swamp?
It’s best to keep the political discussion brief, acknowledging the headlines have been disquieting.
Next, stick to what you do best. You are the financial expert. It is your area of expertise, so steer the conversation back to the economic fundamentals and the portfolio.
If you’ve had these conversations before, reiterate that longer term, stocks take their marching orders from the economic fundamentals, not the political arena.
Emphasize earnings and economic growth as the premise for your long-term view on the market.
This is a good time to emphasize the importance of the investment plan. It is a roadmap to the client’s goals. Remind them that markets will always enter periods of volatility, and their investment plan incorporates, mitigates, but does not eliminate market volatility.
Any detours, i.e., hoping to time the market’s ups and downs, are rarely fruitful.
If you take a more tactical approach and are worried about a possible correction, share your concerns and the steps you are taking to shield your clients.
Finally, keep in mind that they are calling you for reassurance. You are managing their emotions. We may see more disturbing headlines, but ultimately, the markets will march to the tune of earnings and the economy.