For both equities and fixed income, “this is a backdrop where you do want to stay up in quality,” said Sonders. On the fixed income side, “you’re not getting enough of a yield pickup by going out the risk spectrum into high yield, given how tight spreads are. So stay in investment grade or in Treasurys,” she said.
Sonders would advise investors to stay disciplined, “the boring stuff” like diversification across and within asset classes, making sure they’re aware of concentration problems in their portfolio and periodically rebalancing. These are the tried and true recommendations from Schwab, particularly in an environment like this,” she said.
While some investors rebalance on a calendar schedule, Schwab suggests considering volatility- or portfolio-based rebalancing, “meaning let moves in your portfolio beyond some parameters dictate when it might make sense to do some trimming or some adding as opposed to just waiting for a moment in time on the calendar,” Sonders said.
Advisors, besides conveying these themes to clients, may need to “help the half of the people that are not happy about what happened, not letting the emotion associated with a very emotional election get in the way of investment decision making.”
Peter Mallouk
Creative Planning’s president and CEO, Peter Mallouk, also recommends sticking with a diversified portfolio.
Addressing potential market activity through year end, he told ThinkAdvisor by email Wednesday, “Betting on two months of market movement is never a good idea, so our strategy is the same: Stick with a diversified portfolio that tilts heavily towards the biggest companies in the United States.
“That’s done very well for us over the year, and last 10 years, and likely will over the long run as well,” Mallouk added
“Historically, when the market has been up over 20% going into November, it has averaged more than double its normal return over the next two months,” he explained.
What would he tell advisors now?
“Clients can make big mistakes around elections, but if the past Trump and Biden administrations have shown us anything, it is that the market finds a way forward. Encourage clients to get invested sooner rather than later. Nothing kills a plan like staying on the sidelines too far into the game,” Mallouk said.
“Clients should brace for volatility. Not because of this election, but because the lack of volatility we have seen recently is not at all normal. Expect more of the norm: market swings, corrections and dark moments. We always need the reminders that there is a reason everyone isn’t invested in equities,” he stated.
Ryan Detrick
Ryan Detrick, Carson Group chief market strategist, sees further potential for stocks this year.
“We’ve been overweight equities since December 2022 and we remain in that camp. Even though stocks have had such a great run, the truth is many investors have missed the gains,” he told ThinkAdvisor by email Wednesday.
“The economy remains solid, inflation is last year’s problem, the election uncertainty is over, and the Fed is now firmly dovish. These are all nice tailwinds and why we continue to expect to see higher prices into the end of this year,” Detrick said.
Advisors may need to help clients navigate their post-election emotions, he said.
“Advisors woke up to half of their clients happy and the other half asking should they sell everything. This is why what advisors do is so important, to keep emotions in check, whether clients are too high or too low,” he said.
“The reality is history doesn’t show much correlation between stock market returns and who is in the White House,” he said, suggesting advisors remind clients that the bull market likely has “plenty of legs left” given the strong economy, record earnings, contained inflation and a dovish Fed.
“The continued broadening out of this bull market is one trend we see continuing. Areas like small caps, midcaps, financials and industrials are all areas that should benefit from a strong economy in 2025,” Detrick added.
“We continue to stress to own a diversified portfolio and one that doesn’t just always chase the shiny object. There are many parts of this market that aren’t expensive and those likely will be the areas that lead going out into next year,” he added.
