For investors hoping President-elect Donald Trump’s campaign promises could translate into future stock-market returns, one analyst at Wells Fargo Investment Institute is urging caution.
When Trump won the 2016 election, the common wisdom was that the incoming administration would enact policies that would benefit areas like small caps, real estate and traditional energy companies. While each of these assets saw a post-election pop through the end of 2016, the enthusiasm was “short lived, as the fundamental supports for these investments were lacking, and each underperformed considerably through the following 2020 election,” said Austin Pickle, investment-strategy analyst at Wells Fargo Investment Institute.
A similar reaction occurred after President Joe Biden took office in 2020 with enthusiasm for clean-energy policies, which led to the short-term outperformance of related companies, only to have the group considerably underperform over the next four years, Pickle said in a Tuesday client note.
As a result, the analyst advises against “reactive trading activity,” and he suggests investors “maintain appropriate portfolio allocations” for their investment objectives, time frame and risk tolerance regardless of election results.