If You Remember Nothing Else, Remember This

There are a lot of narratives out there in the post-election aftermath talking about how stocks are rallying on Trump’s plans or because his policies might be inflationary in a good way or conducive to infrastructure spending or whatever.

It’s very important that you ignore it all.

Because the same headline writers and chief strategists were anointing the 300-point Dow surge last week as the “Hillary Rally”. They were also pointing to the FBI dismissing the email thing as the reason why stocks rallied Monday and Tuesday.

They don’t know what they’re talking about.

Here’s what I want you to take away from the week that was. In fact, if you remember nothing else, remember this: Markets stall or sell off on uncertainty and they rally hard on certainty. Markets like answers. They don’t like President Trump any more or less than they like President Clinton.

They would have rallied hard no matter what so long as we had a clear-cut winner.

Markets will rally on anything certain and act like shit on anything uncertain. This includes Brexit, rate hike decisions, bankruptcies or the invasion of a foreign country. In the run up to these events, stocks stumble about and indecision is ubiquitous. People don’t commit. They think and worry.

And then when the event happens they will typically buy it. Even if the initial knee-jerk is violently lower.

Why is this the case? Because investors, and people in general, are highly adaptable to new realities.

The worst case scenario, the scenario that I think the market feared the most, was a Clinton victory followed by a non-concession by the Trumpets, followed by chaos. In the absence of that worst case coming to pass, we rallied hard. As we will always do once the big bad event has come to pass, regardless of what actually happens.

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