We’ve had a few questions about the election results.
Once again, the American public found a way to make their frustrations felt. As in most things in life, the answer to “what will happen next” is “it depends” and “wait and see.” But we do have some general observations.
As you know from our Muhlenkamp Memorandum, for the past several quarters we have observed slow to no growth in GDP and corporate earnings, which made it hard for us to justify most current stock prices. In our opinion, stock market prices have not reflected underlying economic and corporate realities; so we’ve held a lot of cash. The uncertainty resulting from the Trump victory has already caused some stock prices to come down; this may give us a chance to put some of our cash to work.
We are heavy in select bio-tech companies which are having a big bounce today; apparently on the premise of reduced pricing pressure, but there is no predicting how long that will last. For most industries, we expect a bit of re-appraisal, which may result in lower stock prices, which may open up values there as well.
We continue to look for good companies selling cheap, and good companies usually don’t sell cheap unless there is uncertainty and some confusion in the markets. Yesterday’s election certainly resulted in that and so presents an opportunity for us as value managers and active stock pickers. That may be a net positive from the election.
In terms of the general economy and “what to do next” we are reminded a plan, a blue print, already exists; Speaker of the House Paul Ryan’s “A Better Way.” We think his proposals make sense, and the odds of them becoming policy are higher under a Trump administration than they would have been under a Clinton administration. So a Trump victory could be a net positive in that respect as well.
We appreciate your continued confidence in our ability to guide you through these uncertain, chaotic, and confusing circumstances in our efforts to protect and grow your assets. We are sticking to our discipline of bottom up, value driven, active stock picking and we encourage our clients to hold the course in terms of their own spending, saving, and investing. Now is the time to stick to your financial and retirement plans, not to abandon what you have been doing thus far.