At economic conferences around the world, approximately 90% of the economists attending believe that Trump’s policies are going to contract, not expand the economy.[1] So why am I staying invested in the markets? One quick answer is that I’m investing for my entire life, not just the next 4 years, and the markets often reflect a change in economic policy well before a new leader is elected.
It’s confusing, but when we look at historical evidence, we see that no matter how irrational the policies of any President, investors did best by staying invested. In fact, no economist has been able to show that there is any investing methodology that does better than a fully committed ultra-diversified strategy.
With many of my clients and friends asking me “what should I do now?”, here are my suggestions for how to take action with your investments and employ your hard-earned money to do the most good in the world:
- Stay invested and know that market movements defy logic. Don’t get left behind by thinking you should stay on the sidelines for the next 4 years. The world is a big place and the odds of doing well are so greatly in your favor if you stay invested. And if you do well, you will have more money to give away. Every time I think that I know better than over 100 million other investors pricing the market, I’m aligning with a fantasy that has a lottery’s chance of winning.
- Vote with your dollars by buying products from and investing in companies whose values align with yours. Think of money as a powerful tool. More money in the hands of people who want positive things for our country and the world is a good thing. Ask companies you buy from to state their concerns about policies that you feel are detrimental to the safety and economic prosperity of our country. A 2013 study showed that 97% of climate scientists endorsed the consensus position that humans are causing global warming.[2] Climate change is now one of the biggest threats to our economy. According to the Citi Report from Citigroup, the estimated cost of climate change (if nothing is done) will be $44 trillion by 2060.[3] (That’s a big number considering that our current Gross Domestic Product is around $17 trillion)
- Visit the AsYouSow.org website to learn about taking shareholder action – one of the most effective ways to bring about global change. A shareholder resolution can force a company, for example, to stop using GMO’s in their cereals or disclose how their company’s operations impact the environment. Perhaps you have an idea for a resolution that the non-profit “As you Sow” could implement.
- Think about shifting your investments to impact investments – putting money into companies that decrease climate change, for example, or are otherwise aligned with your values. Many money managers are avoiding or decreasing fossil fuel investments because they think it’s a losing bet. China is building enough charging stations to power 5 million cars by 2020 and the cost of batteries that store energy (when the sun isn’t shining) have decreased by 70% since ’08. Here’s an interesting stat from Harvard professor George Serafeim: a portfolio of companies committed to sustainability produced higher returns over the past 20 years than a non-sustainable portfolio. The World Economic Forum said that the water crisis is the No. 1 global risk and climate adaptation failure and extreme weather were Nos. 2 and 3.
This is a time to do what has consistently worked. Stay invested in many different categories, spend wisely, speak up/reach out, and give and invest your money to further the world you wish to see today.
For a more in-depth look at these points, Susan Olson and I spoke about what is next for your money under this new administration during our last Abacus Educational Series on February 8th.
You can watch the recorded version online at facebook.com/AbacusWealth.
Resources
[1] http://www.igmchicago.org/surveys/100-day-plan
[2] http://iopscience.iop.org/article/10.1088/1748-9326/8/2/024024/pdf
[3] https://www.nytimes.com/2016/12/03/opinion/sunday/cashing-in-on-climate-change.html
