Is this Another Watergate for Investors?

nixonPresident Trump’s firing of FBI Director, Comey, and his Russia ties have many investors fearing that this is going to be another Watergate. We all certainly hope not, as the S&P 500 fell about 50% from the start of 1973 through President Nixon’s resignation in August of 1974. This leaves us all begging the question: what will this political scandal do to stocks and your retirement?

The President certainly picked an appropriate time to escape both the weather and political heat. However, the pressure has not gone away. With the hiring of an independent prosecutor, you can bet there will be a lot more fireworks that will bring increased volatility and risk to investing.

Although the Watergate scandal was serious, it was not nearly the gravest issue facing our fractured nation back in 1973.

At that time, the U.S. was just pulling out of Vietnam, massively draining the Treasury as well as the economy of over 100,000 working age men. Nixon took the U.S. off the gold standard, floating the dollar, collapsing our currency, and we saw our first oil shock throwing the country into a recession. These things tore the nation apart; unprecedented since the Civil War.

It all comes down to whether the President’s agenda of tax and health care reform have any chance of becoming law this year. Time is of the essence. If there are too many distractions to enact new legislation in the near future, stocks will likely sell-off.

The incumbent President’s party typically loses many seats during midterm elections and any majority that is held. For the last 21 mid-term elections, the President’s party has lost an average 30 seats in the House, and 4 seats in the Senate. Therefore, it is expected that the Republican majority will be over in November 2018.

Investor Strategy

What will be the result of this current firestorm? I put my money on someone being thrown under the bus by the Administration, leaving the President clean. With that being said, it won’t be a smooth ride for investors. Furthermore, there is no guarantee that it will not pull down the Presidency or roil markets, thus destroying retirement dreams. This is no time to throw caution to the wind. Active hands on tactical management is critical for this market, as passively invested portfolios will be slaughtered.

When it comes to successful investing, begin with building and maintaining a personalized retirement master plan that is customized for you and your family…. not a ‘one size fits all’. Once you tell your portfolio what to do, then you can create a portfolio that is set up correctly to get the best returns, but with the least risk possible. Or what I like to say on my show “Invest for need, not for greed”™. It will give you peace of mind, as it does for our clients every day.

I’m sure I don’t have to remind you that at this point in your life, you cannot replace this money! Be the expert or work with a Retirement Advisor that can help you stay on track.

Take advantage of this relatively quiet time to review, not only your portfolio, but your overall master plan.

As always, feel free to contact me with any comments or questions.

 

Cheers -Keith
916-925-8900

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