As we emerge from the most divisive US Presidential election in generations, three essential questions demand our attention:

1. What does the election result mean for the economy?
2. What does the election result mean for investment portfolios?
3. How do we heal the world?

1. What does the election result mean for the economy?
It is far too early to tell whether new policies will positively impact the economy in the late innings of a lackluster—though consistent—economic recovery. Given their anticipated leadership in the White House, Senate, and House, the onus will be on Republicans to develop, approve, and implement plans for meaningful fiscal stimulus as promised throughout their campaigns. Two years will go quickly, so they need to shift from the opposition party to the party of leadership quickly.

Since 2009, the Federal Reserve has done what it can to improve the economy via monetary stimulus by lowering target interest rates and transferring roughly $4 trillion from weak bank balance sheets to their own. Over the past four years, the Fed has consistently deferred expected increases to target interest rates due to varied concerns about US employment, weakness in the emerging markets, and China’s slowdown in growth. Entering 2016, the Fed had planned on raising rates four times; they have not raised them once this year. Potentially they raise rates in December, though uncertainty around the impact of an unexpected election result may once again earn their deferral.

It’s always challenging to separate campaign rhetoric from the policies elected officials will actually pursue and then from the policies for which they will be able to gain traction. Given that trade agreements, immigration policy, health care policy, energy policy, taxes, and regulation are all on the table, it would be premature to predict what policy-makers will do with this opportunity.

2. What does the election result mean for investment portfolios?
As the election results came in Tuesday night with Trump more and more clearly moving toward victory, US stock market futures fell over 4.0%, predicting despair upon market open Wednesday morning. By 2 AM Wednesday morning, well before market open, that decline had reversed itself and the S&P Futures were down just 1.5%, a 2.5% reversal to the positive in just two hours. By early Wednesday, many markets moved into positive territory with emerging economies still taking the majority of the pain. Wild currency volatility seen last night also has calmed with many major currencies such as the Euro and Yen paring much of their overnight volatility. Selling into this kind of uncertainty might be the right decision for a specific investor, but it’s not a decision to be taken lightly.

Interestingly—and surprising for many—people on opposite sides of the presidential contest have expressed strong reservations about the election, reaching precisely opposed conclusions based on mirrored assumptions about the candidates. Both Clinton and Trump supporters have inquired about hedging their portfolios against a massive stock market sell-off if the other candidate wins. Ironically, they would be selling their stocks at a discount to enthusiastic supporters of their opponent or buying gold at rich prices from their ideological doppelgangers. Too often, investors forget that the country has been roughly equally divided about this election, and that barring something highly unusual, buyers and sellers may be well matched in the coming weeks.

Our team has invested portfolios through the demise of the bubble, 9/11, the WorldCom, Enron, and Madoff frauds, the Great Recession, Standard & Poor’s downgrade of the United States, the end of a 20 year commodity supercycle, uncertainty about the European Union, China, and most recently, the Brexit. In just 16 years, we have guided clients through two “once-in-a-hundred-year” market downturns and several secular shifts in the global economy.

Despite all of the compelling reasons to NOT invest over the past 16 years, we have found that:

  • Companies with strong balance sheets and sustainable earnings growth tend to perform well over time.
  • Debt issued by solid countries and companies at a positive inflation adjusted yield can add value to a portfolio.
  • Low cost, highly liquid, and transparent hedging strategies can add new sources of return potential and risk mitigation.
  • Sometimes, some parts of the market are so efficient that it’s best to access them with low cost index-based investments.
  • The best time to invest is when it is hardest.

Since 2011, risk assets have sold off in the 7-10% range five times, recovering within roughly four to eight weeks each time. Will there be a more significant, more long-lasting correction ahead of us? Of course. Do current economic fundamentals predict that major sell-off? No. Could those conditions change? Yes.

3. How do we heal the world?
Syntrinsic strives to make a positive social impact through our guidance on finance and investment strategy in the nonprofit and philanthropic sectors. We believe in each person’s personal responsibility to be of service, to find ways to repair what is broken, heal what is wounded, build what is needed, to educate and create despite all of the legitimate reasons not to.

This election, like others around the world this year, has revealed that many people feel angry and disenfranchised. We knew before the election took place that a large portion of the country would awake today in fear and pain, regardless of the results. And yet, we also awake today to a country with tremendous potential and many good people committed to moving us forward regardless of who we have elected or not. We can hope for our elected representatives to reach out across barriers of party, policy, and demographics, but we cannot wait for them to do so. In the meantime, it is far more important that we the people of America do the bridge-building ourselves. In America, creating authentic community always has been personal, not political.

This is not a time to sell securities, buy gold, move to Canada, gloat about victory, or wallow in despair. There is important work to do; we all are just the ones to do it.