Donald Trump is the new President of the United States and in all reality for most reading this, your new Boss.
It feels rather weird to write that, however, whether this brings you a sigh of relief or a cry of terror, the fact remains that there will be changes.
There will be changes for nearly every American and I would say especially for those who are federal employees. Rather than discussing whether or not Donald Trump is fit to be President, I am going to look at how Donald Trump as President can/will change things for you, the Federal Employee; the Government Worker; the Armed Services Member; the TSP investor.
Rather than discussing whether or not Donald Trump is fit to be President, I am going to look at how Donald Trump as President can/will change things for you, the Federal Employee; the Government Worker; the Armed Services Member; the TSP investor.
So, before I go any further, please think before commenting. This is not the forum to discuss your political beliefs, but rather to debate what to expect going forward.
Let’s take a look!
I am going to mainly focus on how a Donald Trump Presidency affects federal employee benefits and retirement rather than looking at everything. I am not an “expert” in some of the day-to-day operations of a federal employee, and as such, I shall leave those details to those “experts.”
I am, however, able to disseminate what will happen for the financial changes of federal employees.
The first thing I want to touch on briefly is..
If the polls that have been going around are any indication of what will indeed happen, you may be seeing quite a few new faces in your workplace.
A Government Business Council poll found that 14 percent of federal workers would definitely consider leaving their jobs if Donald Trump was elected on Nov. 8th. 13 percent claimed they might consider leaving and 9 percent were unsure.
Now, whether this is people following the path of many Americans who have said they would move to Canada in a show of flaring their feathers or not, it’s hard to deny that there will be quite a few people leave federal service.
One of the other things to keep in mind is those who are eligible for retirement but have been waiting for a reason to leave. I would guess that we will see a greater percentage of retirees this year due to the change in Presidency, although that is something I do not have data to back up.
If one thing was certain, both Hillary Clinton and Donald Trump were polarizing enough candidates that whoever was elected would cause significant changes in the federal workforce.
Under Trump’s leadership, there are a few things expected.
One of the first things is that Donald Trump has promised to get rid of waste at federal agencies as he stated in a GOP primary debate: “We will cut so much your head will spin.” When he accepted the nomination at the Republican National Convention acceptance speech, he said he would ask every agency head to “provide a list of wasteful spending projects that we can eliminate in my first 100 days.”
Although these sound like possibly scary ideas for federal employees, when it comes to reducing the size of government, Trump is quite different from others in the Republican Party.
Rather than wanting as small a government as possible, Trump has said he will preserve Social Security, increase military spending (quite dramatically), and more than double Hillary Clinton’s plan to spend $275 Billion on infrastructure.
There’s much more that could be said on this topic, but I would like to get into how the market will likely react to Trump becoming, President.
Thrift Savings Plan: What You Should Be Doing
As the election drew near, I began to receive the same question over and over.
“What will happen with my TSP if X get’s elected?”
First off, this is a question my clients rarely ask. The reason is that they’re invested for the long-term and rather than investing based on what the talking heads on TV tell them, they’re investing according to their own plan.
So, if you do not have your own plan for investing in the TSP, I highly suggest you get one. You can find how I help federal employees develop their own plan through the Federal Retirement Blueprint here.
The problem in chasing gains in the market based off of current news is like trying to catch a falling knife. Sometimes you’ll come out on top, but rarely. Even professional traders whose sole job is to time the market rarely beat the S&P 500.
Value investing is a topic popularized by one of my investing heroes, Benjamin Graham. Graham was a mentor to somebody you’ve probably never heard of named Warren Buffett (joking) and taught him much of what he knows today.
Buffett has stated many times that the majority of people should not be trying to trade their investments, but rather invest for the long-term.
Although I think the changing of the guard in the highest office in the land most certainly is “news” most of what you hear on TV is not news worth listening too. Warren Buffett agrees:
“Owners of stocks, however, too often let the capricious and often irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits – and, worse yet, important to consider acting upon their comments.”
Thrift Savings Plan: How to Invest Now That Trump is President
So, let’s say you do HAVE an attack plan for investing with your TSP and you’re trying to figure out how to best approach investing in the “Post-Donald Trump Elected as President World.”
Here are a few things to note based upon how the market has reacted over the history of presidential elections:
- Mr. Market almost always responds much better to elections where the outcomes are predictable (the 2016 election was anything but predictable.)
- Mr. Market on average rises an average of 6% in the first year of any presidential term and an average of around 7% for all other years.
- The last seven months of the President’s last year in office has been positive in all but two election years since 1952.
- The party that controls office hasn’t been significant to whether the stock market has done well or not. Many studies have been done, and nearly all show similar results between parties.
Many pundits believe that Donald Trump’s come from behind victory will be similar to what happened with Britain exiting the European Union, also known as Brexit. Stocks took a slight dip and then rose to all-time highs.
As I write this on the day following Trump’s victory, the Dow Industrial Average is above all time highs despite an overnight sell-off.
I would say that overall people are optimistic about what Donald Trump can do about improving the U.S. Economy. Over the next couple of years, we will be able to see what actually happens and have a better picture. At this point, investing based on the idea that the market will go up because a Republican is in office is a lot like gambling.
Moreover, very few if any should gamble with their TSP.
Thrift Savings Plan: Sectors to watch
There are a few sectors that could potentially do well with Donald Trump as President. Although you cannot invest directly in these sectors with your TSP (another advantage of an IRA), you can invest in them through your fund selections.
Hillary Clinton had vowed to create a task force that would monitor for price-gouging among pharmaceutical companies. She also was a strong supporter for monthly out-of-pocket spending limits for consumers on certain drugs.
Trump’s only specific plan involved allowing Americans to seek out their medicines in other markets, like Canada.
The TSP fund that encompasses the most pharmaceutical companies would be the S-Fund.
The energy sector as a whole should, for the most part, be a beneficiary of Trump winning the Presidency.
Trump has proposed an “energy revolution” that would lift restrictions on shale production and open up oil and gas production on federally protected lands as well as offshore.
Energy makes up around 7% of the C-Fund. Therefore it would be your best option if you’re bullish (expect it to increase) in the energy sector.
This area is rather obvious. The NRA was a large supporter of Donald Trump and for a good reason; there will most likely be very few/if any gun restrictions announced during his term(s).
The C and S Fund’s contain some defense-related companies like Smith & Wesson. However, no funds within the TSP include a significant percentage.
In summary, this was a polarizing campaign, no questions about it.
Now it will take time for investors to judge the implications of the newly elected and act accordingly. We can look for reduced regulation across the US, improving infrastructure spending and tax reform.
Fears of massive trade wars should be calmed by the need for Congressional approvals.
As is normal following a presidential election, we can expect volatility to be elevated in the coming weeks as the real winners.
In the end, you should invest for the long-term according to your plan.
– Cooper Mitchell