Nov 17, 2016 4 min read

Many people?are asking how last week’s election will affect financial markets and what they should do to protect their families.

There was a concern that a Trump victory would send the stock market down. This trepidation was based on several factors – the market had priced in a Clinton win and the feeling was that there would be little change from the policies of the Obama administration. While many people were not sure which party would win control of the Senate, it was unlikely the Republicans would lose control of the House. This outcome would have continued the gridlock that was happening in Washington for years.

When the FBI announced it was reviewing new Clinton e-mails, the market became nervous and went down every day for more than a week. Once the FBI announced that there was no new evidence, the market jumped up because it looked better for Clinton. This was on Monday, a day before the election. The stock market does not like uncertainty.

On election night, as the returns began coming in and Trump was winning more states, the market took an 800 point drop in overnight markets. Trading at that time is very low volume, so any movement can easily become exaggerated. Our government is based on the smooth transition of power between the current administration and the newly elected officials. With all of the fighting during the campaign, there were concerns this would not happen. As soon as all three participants began to accept the results and do what was expected of each other, the stock market started rising and quickly erased the losses. This was very similar to what was experienced with the surprising passage of Brexit this summer.

During Brexit, there was a big downturn in the stock market for a couple of days and then it quickly made up the downturn. In both cases, this was an overreaction to something that will take time to play out. In both cases we do not know the long-term effect at this time.

However, there are some things that we do know. We are very likely to see fiscal stimulus growing the economy. For many years, gridlock has kept things from happening in Washington. Fiscal stimulus is when Congress passes spending bills, such as those we are likely to see in infrastructure improvements. This will create jobs as our bridges, roads and other public facilities are repaired or replaced.

We are also likely to see tax reform. If rates are lowered, people will have more money to spend and consumer spending generates about 70 percent of our economic activity. Congress is also likely to enact tax changes to get the trillions of dollars to return home that U.S. companies hold overseas. Health care is going to be reformed, as consumers are getting hit with huge increases in health care premiums.

Trump also promised getting change in trade policies. All of these changes will present different opportunities and obstacles to companies. Whatever decisions are made will reflect on which companies may be best in which to invest. Some sectors such as financial services and energy may benefit from less regulation.

There will be many questions about how these changes will be paid for. Will the national debt expand or will increased growth in the economy generate enough tax revenue to pay these costs? The answer will not be known for some time.

While many of these things are out of your personal control, you must adjust the things that are in your power.

Interest rates are more likely to climb faster because we will experience more inflation, a key measure monitored by the Federal Reserve Board. As interest rates rise, the value of bonds will go down.

Rising interest rates are likely to have a negative effect on stock values because there will finally be alternative asset classes with some return.

You are now more responsible for your family’s retirement outcome than ever before. You must have a plan for market volatility, rising health care costs and longer life expectancy.

The world is changing and your financial plans should react accordingly.

Gary Boatman is a Monessen-based certified financial planner. He is the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, contact business editor Michael Bradwell at mbradwell@observer-reporter.com.