Lots of people seem to be wondering if now is a good time to get out of the market. I’ve had a few family members and friends ask the same thing. “Are you cashing in now?” With the markets at all time highs and with a Trump administration that has people on edge asking whether it’s time to get out now is a completely normal reaction.
However, it’s more than likely not the best idea to sell your stocks just because you’re worried about Trump.
Should I move my cash out of stocks and into cash?
The best answer to that question is “it depends”. If you’re older and closer to retirement then it might not be a bad idea to move some of that money into cash. You don’t want to have to do it after a 30% beating do you? It’s always better to be safe than sorry.
However, if you’re in it for the long haul, which is most of you, then the best option is most likely to hold off and stick it out. Why? Well, for one thing, even if the market does decline you’ll have lots of time to make up for it as long as you keep holding through the downturn and into the next bull market up. There’s nothing stronger than a good old fashion buy and hold strategy.
The other thing to consider is that you can’t let your emotions get in the way of investing. Maybe you don’t agree with a lot of what the new president has done. Maybe you don’t agree with the policies that he’s trying to implement. That’s perfectly fine, but when you start letting your political opinions get in the way of your investing decisions you can really hurt your portfolio.
Just because you think Trump has bad policies doesn’t mean these policies will be bad for the market. It could actually be quite the opposite. Don’t be foolish and let your emotions get in the way of your financial decisions. Instead, you should let your own need for that money and your risk tolerance be the reasoning behind your decisions.
The things that have headlined the recent “Trump” rally include things like “deregulation” and “corporate tax cuts” which in reality could boost growth. This could be the beginning of another boom for businesses. Do you really want to miss out on the extending bull market? Some people speculate that we haven’t seen the blow off the top that we usually see at the end of a bull market. What about the fact that the trend is still your friend? And right now that trend has been up for many years.
What if Trump starts a trade war?
Yes, there is the fear that Trump may do things that could drastically alter the current economic outlook for the entire world. Maybe Trump ignites a trade war with all the big players that disrupts everything we know about the world economy today. What about the possibility of not only a trade war, but also a military war. What would that do to the world economy? For some people Trump is just too brash and too unpredictable to risk staying in stocks.
For those people I completely back you when you say you want to move into cash. More power to you. It’s definitely not an unwise decision to move your money into something safer if you need it within the next 5 years or so. With the market at all time highs it’s completely valid to say it is riskier today than it was last year, or the year before that.
Are stocks just going up because they should be?
Let me just leave you with one more thought. Could it be that stocks are just going up because that’s what they should be doing now? Maybe it’s what they should be doing because of what the companies have been doing in the past few years. It’s clearly evident in many companies balance sheets that their stock prices should be rising. So why does it seem scary when they do so? Why is it that when they are near all time highs that people get scared, insisting that the new Trump administration will be the bull market’s demise.
One of the things I love to do is buy when people are fearful. I have heard from a lot of people these days that they are fearful of the Trump admission and what they will do to the country and the world economy. This collective fear is part of the reason why I will not be selling right now. Actually, I have added to my portfolio since the election. I do have a high tolerance to risk though. Nevertheless, I do think it’s the right move at this point in time.