I Was Wrong… and I Paid for It
In 2016, I predicted that if Donald Trump won the presidency, the stock market would sell off hard.
My reasoning was that the market doesn’t like uncertainty, and Trump is anything but predictable.
I argued that late-night tweets and rash decisions wouldn’t be good for the stock market.
Well, in the words of Arthur Fonzarelli, “I was wrrrrr – I was not exactly right.”
The market didn’t fall. Instead, it did very well. The S&P 500 Index jumped 18% since Inauguration Day. In fact, 2017 will be remembered as the least volatile year in stock market history. The largest decline all year was less than 4%. Every single month was positive.
Shortly after I made my prediction, I was asked by a reader to put my money where my mouth was. So I said that if the stock market did not drop 30% by the end of 2017, I would donate $1,000 to a charity of the Wealthy Retirement readers’ choice.
I always honor my bets. So I happily donated $1,000 to this worthwhile organization. Below is the confirmation email I received.
Going forward, what’s my prognosis for the market?
I still believe that the president’s unpredictability could eventually be troubling for the market. And if something does upset the market, we could see a nasty move lower.
However, stocks certainly aren’t acting like there’s anything to worry about. The market is a forward-looking indicator. So with stocks steadily climbing and interest rates finally waking up, perhaps the markets are telling us that the economy is going to stay strong or get stronger.
That would certainly be great news.
In my original article forecasting the drop in stocks, I made the point that even if I was right and stocks got hammered, it wouldn’t matter over the long term.
Over the past 100 years, we’ve had plenty of things to worry about in the White House. We’ve had an assassination, an impeachment, scandals, corruption, incompetence… and yet – over the long term – stocks continued to rise.
In fact, the only way you didn’t make money in the stock market over any 10-year period was if you sold during the depths of the Great Depression or Great Recession. Even if you were invested during those periods but didn’t sell, you were made whole as long as you held on for just a few more years.
That’s why I always say that if you’ll need the money that’s invested in the market within three years, take it out now. Anything can happen in the short term. But if you have a long-term time horizon, don’t worry about who is in the White House, how long the bull market has been running or any other factors that would normally scare you out of the market.
Stocks go up over the long term. They always have. And unless you panic and sell at the lows of historic collapses, you should make money whether the White House is occupied by Trump, a Clinton or Kanye West.