The first reaction for many investors around the world was to sell — nearly everything — late Tuesday as it became clear that
But stocks proved resilient Wednesday morning, benefiting those who sat on their hands instead of selling immediately. The market likely won't stay this calm in the next few days and weeks. Analysts are forecasting big swings as investors digest the surprising election result, but their advice for investors remains: Stay the course. Elections can mean big short-term swings for stocks and other investments, but they historically have had minimal impact over the long term.
Here's a look at what experts say to expect:
WHAT'S GOING TO HAPPEN TO THE MARKET?
The answer is that no one knows. Not even the market knows. Late Tuesday, the futures market — where investors place bets on where stock indexes will end up — was calling for a drop of at least 5 percent for the widely followed
History has shown that a presidential election doesn't singlehandedly alter the stock market over the long term. Other factors, such as how expensive stocks are relative to their earnings and what the
Dating back to 1853, the average annual return for stocks under Republican presidents has been 11 percent — precisely the same as for Democratic administrations, according to the investment strategy group at Vanguard. The
WHY SO MUCH CONCERN ABOUT A TRUMP PRESIDENCY?
Because no one knows what kinds of policies a
He also represents uncertainty, one of the biggest bugaboos for markets. Will he convince
ARE OTHER PEOPLE FREAKING OUT?
More customers than usual at Fidelity are calling in to ask what they should do, but only a few more. The call volume is about the same as a typical Tuesday after a three-day weekend, Fidelity says.
One measure of investor fear — an index that measures how much traders are paying to buy insurance against future drops in the S&P 500 — actually dropped 20 percent Wednesday.
WHAT SHOULD I BE PREPARING FOR?
More swings in the market.
Don't be surprised to see stocks follow up their gains on Wednesday with losses on Thursday or thereafter, as investors further digest the ramifications of a Trump presidency. And don't be surprised if they just turn around and climb higher again the next day. Because of how much uncertainty exists about what a
"Volatility is the result of people getting excited about news and reacting emotionally, getting nervous and reacting negatively, and then around again," says
Following Trump's victory, Moore expects to see volatility continue over the next six to eight weeks.
WHAT SHOULD I DO WITH MY 401(K)?
Try to do nothing, even if the market starts to swing sharply, experts say.
Stocks are long-term investments, meant to be held for many years. Big swings in the interim are normal and should be expected. That higher volatility is the price that investors pay in exchange for the higher returns that stocks have historically provided over bonds and other investments.
If you're feeling nervous, maybe the underlying problem is that your portfolio has too much in stocks, says
The largest stock mutual fund has returned 183 percent since the start of 2009, for example, far outpacing the 37 percent return for the largest bond fund. So, unless you've been rebalancing your portfolio regularly, you may have a much bigger percentage apportioned to stocks than before. And as investors get closer to retirement age, experts suggest paring back on stocks and devoting more of their portfolios to bonds.
"If this news event has caused you some anxiety," Sweeney says, "use this as an opportunity to rebalance."