As the U.S. Presidential election nears, investors are as nervous. Polls indicate an overall Clinton lead but with potential game-changing news breaking almost by the hour, nothing is certain. And uncertainty is something Wall Street abhors.
Advice from experts and analysts could provide guidance – assuming the underlying assumptions are true a day after the advice is given. And therein lies the problem.
Goldman Pushes Infrastructure
More than a month ago David Kostin, Goldman equity strategist had the following tips for investors: Protect against a rise in equity uncertainty; Buy companies with government revenue exposure; and Buy weak performing defensive stocks.
According to Kostin, no matter who wins the election public spending would likely increase making companies like Vulcan Materials Co. (NYSE:VMCC), Martin Marietta Materials Inc. (NYSE:MLMF), Summit Materials Inc. (:SUMN/A), and Eagle Materials Inc. (NYSE:EXPC) all attractive – to Goldman at least.
The infrastructure theme was also sounded by Forbes, which said no matter who wins the election, infrastructure stocks should see a bounce. Clinton has said she would propose a 5-year $275 billion infrastructure spending plan and Trump says his plan would total $500 billion.
Three stocks Forbes contributor Brett Owens likes are Cummins (NYSE:CMIA), which just posted a sales decline; Deere (NYSE:DEC), a company that tends to be overlooked when it comes to construction, even though $6 billion of the company’s $26 billion in sales in 2015 came from that sector; and WEC Energy Group (NYSE:WECC), the only utilities company Owens feels is worth buying.
On Timing The Market
On the other hand, for anyone thinking about jumping ship until after the election, most experts say it’s a bad idea. It’s just another version of trying to time the market, which has far more naysayers than proponents.
Consider this: The average investor in a DALBAR study had a 20-year return of 5.19% while the S&P 500 Index returned 9.85% over the same period. The reason for the difference owes to the investor trying to time the market – sometimes in subtle ways, sometimes not so much.
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What To Do
If timing the market is the wrong thing to do, what’s the right thing? Two things matter, according to Forbes’ Kelley Long: 1) your time horizon and 2) your risk tolerance. Time horizon refers to how long until you need your money and how long it has to last.
Risk tolerance is all about the volatility of the underlying investment, which doesn’t necessarily have much to do with the presidential election – unless your time horizon is extremely short.
The bottom line for most investors is that, aside from buy opportunities that present themselves from time to time, the best thing to do is to manage your investments based more on long-term goals than who may or may not become president.