Sticks and Stones May Break Your Bones but Words Will Never Hurt Your Financial Plans

For all the efforts I am putting into trying to figure out the President-elect's upcoming policies, I can certainly say one thing....I love the twitter wars! I shouldn't. I'm an adult and I want my president to act like a president, but I certainly enjoy the misguided rhetoric he presents and the sometimes brilliant responses that people return. I don't have time to watch reality TV, this provides that guilty pleasure in small doses.

While there is an entertainment value to these tweets, there is also an immediate negative economical effect of the 3 am tweet storm. The market always has an immediate reaction. Most times it's negative. In early December he declared war on drug prices and pharmaceutical stocks had a minor flash crash the next day. In early January, Trump made a false claim that Ford sends cars to Mexico tax free and threatened penalties on the company. Ford stock went down immediately in market speculation. The comedy gold is also market poison.

The problem is that all short term market actions are based approximately 99% on speculation and 1% on fact. The effects of the Trump tweets were temporary and the prices of shares corrected themselves fairly quickly. High volume traders need a reason, any reason, to buy or sell a stock. And they will look for any little detail to affirm their decision. This includes professionals and casual traders. There is even an ap for that! 'Trigger' is an ap that will tell you when Trump tweets about a company you are interested in.

There's plenty of factors that cause people to get overzealous with their stock buying or to send people into a selling panic. It's unfortunate that the impulsive social media activities of the next leader of the free world is a primary one. But alas, such is the nature of the short term investor, God love 'em!!

Luckily, that is not you! Whether you are reading this as a client in my practice, or as any other smart individual with a big picture view of the world and the markets. A long term financial plan works on the premise that you are investing to achieve goals not short term gains. Basing investment decisions on long term trends, instead of unpredictable and chaotic short term variables, leads to more disciplined investing and a more calming financial mindset.

I'm not going to lie, if I had a crystal ball I would certainly love to have advance notice of an upcoming tweet tirade and act accordingly. But such a thing is not possible, and like any other short term market fluctuation, not worth worrying about.

Trump is going to be Trump, and his actions and ramblings are certainly going to cause crazy swings in the market going forward. Your portfolio is going to be affected and I don't doubt you will notice. But if you take the proper steps, and implement a proper financial plan, it doesn't really matter. If you are true to your goals and are a disciplined investor, then your actions will be more powerful than any president.

Blue Sky Financial Group
3478 Buskirk Ave. Suite 1000
Pleasant Hill, CA 94523
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