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Dealing with your portfolio at Trump's 100-day mark

President Trump is the one who said the stock market is a good way to judge his success. He's off to a good start. The major averages are up nicely since the November election and in the first 100 days of his administration.

Donald Trump
Joshua Roberts | Reuters
Donald Trump

Now the decision for investors is straightforward: Do you lock in gains now or do you let them ride? Only you — or yourself in conjunction with a financial advisor — can answer that because it's really based on your own personal situation: your risk tolerance, time horizon and financial goals. But for those who feel it's time to be decisive, here are the pros and cons to consider over the weekend. Saturday is the 100-day mark for the Trump administration.

Index ETFs
First 100 days (%)
SPDR S&P 500 5.59
Dow ETF 6.22
Nasdaq 100 10.34
MSCI EAFE 8.66
MSCI EM 10.15
Russell 2000 5.39

(Source: Morningstar, as of 4/27/2017)

Companies are delivering strong earnings reports. Revenue reports across companies, for the first time in a long while, are also coming in above expectations. But what about that bold agenda promised by Trump? Much has been made of a stock market pepped up on expectations of tax cuts, deregulation and other market-friendly economic policies. I think we'd all argue that 100 days is too short of a time frame to judge the performance of a four-year presidential term.

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Investors should in the least accept that some of the recent stock market gains are owed to these expectations. There is a possibility that if these expectations aren't met, stocks retreat. Then there is the geopolitical stage, featuring North Korea, Iran and Russia.

Investors won't gain by trying to predict the fate of tax reform, or the planet. But here are three questions investors can ask themselves in order to determine whether or not it's time to lighten up on stocks.

1. How much money should I have in stocks?

This depends on your appropriate asset allocation of stocks, bonds and cash. You should have cash on hand for a rainy day, bonds for income and stability, and stocks for long-term growth which you are willing to hold onto even when they're down.

2. Does it make sense for me to rebalance my portfolio now?

If you are much more concentrated in stocks — rather than bonds and cash — than you were a few years ago, then it is a smart idea to consider rebalancing. Did you binge on dividend-paying stocks and under-invest in bonds because you were chasing more yield in the form of dividends? Do you own some of the big tech names such as Apple and Facebook and now these are outsized positions in your portfolio? There are an awful lot of investors who are invested a lot more aggressively than they should be. If rebalancing is the right thing for you to do, then it is time to get more skeptical about whatever is over-allocated in your portfolio, but that doesn't just mean stocks. Investors also need to consider if they are potentially over-allocated to bonds or cash.

3. Am I properly diversified within my stock and bond allocations?

If you're invested in individual stocks, those should be in different sectors. Having a portfolio that consists of Amazon, Facebook and Adobe Systems could be a hugely winning combination. But if those represent 20 percent to 30 percent of your stock holdings, then I'd say you're over-concentrated in technology. Back in 1999, WorldCom and Lucent were among the most widely held stocks. The first one went to zero and the second one went below $1.

ETF
YTD flows ($Billions)
iShares Core S&P 500 $12.40
iShares Core MSCI Emerging Markets $7.81
iShares Core MSCI EAFE $6.15
Vanguard FTSE Developed Markets $5.85
Vanguard S&P 500 $5.47
iShares Core S&P Mid-Cap $3.40
Vanguard Total Stock Market $3.30
iShares Core S&P Small-Cap $3.05

(Source: XTF.com, as of 4/27/2017)

With the proliferation of exchange-traded funds, it is surprising to me that so many investors consider themselves properly diversified by investing all of their stocks in the S&P 500 index tracking ETFs. That would mean you have money in large-capitalization stocks with a heavy bent toward the biggest ones in the index, ignoring the many other sectors and strategies at your disposal today.

Over the long term, your answers to these questions will have a much bigger impact on your ability to reach your financial goals then worrying about the first 100 days of the new administration, which most of us will forget over the next 100 days.


By Mitch Goldberg, president of ClientFirst Strategy

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