×

Don't panic over Trump win. Now is the time to buy stocks

Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

Donald Trump confounded the experts who all predicted that he would likely lose the presidential election and stormed into the presidency with an amazing win against all odds. Not surprisingly, markets shuddered at the thought of a President Trump and the uncertainty rattled markets.

With circuit breakers in place and a rolling downward movement for all global capital markets similar to what happened during Brexit, it's understandable for investors to stand back for a moment and ask what this means for their own portfolio strategy. Should I sell? Should I buy? What does this mean for the markets long-term? How will this impact the economy?

Let's be clear about something right up front; nothing has changed in terms of economic fundamentals based on the election of Donald Trump rather than Hillary Clinton. The relief rally that occurred earlier this week when pundits predicted that Hillary Clinton likely would be elected likewise in no way indicated any change in economic fundamentals. It's pretty simple, Clinton was the known factor, Trump is the unknown. Markets hate unknowns.

What causes markets to move up and now down is the prospect of uncertainty. It's fair to say that Donald Trump's election creates a tremendous amount of uncertainty. And as uncertainty ripples throughout the markets you will continue to see large swings and volatility just like we saw during Brexit.

And what played out over the last 24 hours is reminiscent of the Brexit surprise. So let's take a look at what happened during that cataclysmic event and how people reacted in a moment of panic. Perhaps you remember how frightened everyone was and how the market sold off almost 4 percent in response to concerns about what Britain's decision meant for the global economy. Then magically, markets rebounded. There was no real reason for the recovery from a data standpoint; it was simply just the evaporation of the initial shock. That's how panic works; strong reactions to certain events that cause huge market volatility.

"If you have cash, start looking around. There will be assets that will sell off on an irrational basis that will provide opportunities. Don't be afraid to drip into the markets over an extended period of time when these type of opportunities arise."

But I don't believe from an economic standpoint the impact of the presidential election will have quite the cataclysmic economic impact that many have predicted. Indeed, the market has already recovered from the steep drop as the election unfolded. While there will likely be changes to economic policy, we do not live in a dictatorship and legislative bodies will have their say. Still , it is important to note that in addition to winning the presidency, Republicans now have majorities in both the House and the Senate which should move the agenda towards a Republican perspective. That matters and needs to be monitored for legislative agendas and presidential policies.

Despite these concerns, it is not time to panic. I believe any short-term sell off of the market will be exactly that; short term. I furthermore believe that what really matters for the market and economy is the pace of interest rate increases as well as the state of the U.S. jobs market and GDP growth. That is what will drive the economy going forward in the short term and I believe will shape markets beyond this volatile moment.

If you are invested in equity assets, it's not the time to make rash judgments about which sectors will do well or under perform. It's not time to panic unless you know when the markets will turn up. I know of one investment manager that chose to sell everything at a low moment after the Brexit vote; that didn't work out so well. The temptation is great to take rash action but that is not what you do in times of uncertainty that are not fundamentally related to economic data.

The judgment instead that you should make is to not panic and have confidence that U.S. companies still have relatively strong earnings in a low interest-rate environment. Interest rates are still incredibly low which makes dividend paying assets still a reasonable alternative to paltry fixed income yields. If you liked an asset last week, there is no reason not to like that same asset this week simply because of the presidential election.

Fundamentals are what drive markets and fundamentals should be the foundation of your portfolio strategy. A fundamental view on investment strategy allows you the luxury of withstanding these types of events. If you are a momentum investor, I have no advice for you as market sentiment is virtually impossible to gauge and time. But if you are a fundamental investor and you've carefully constructed your portfolio strategy then this is not the time to panic.

If you have cash, start looking around. There will be assets that will sell off on an irrational basis that will provide opportunities. Don't be afraid to drip into the markets over an extended period of time when these type of opportunities arise. As Warren Buffett often says, the time to buy is when others are afraid and they certainly are frightened right now.

So be prepared for a wild ride over the course of the next several weeks. And do not be deceived into thinking this volatility and fluctuation will go away; it won't. We live in a world where uncertainty is the only certainty. It's not pleasant, it's not fun, but keep your eye on your long-term goals and make sure your portfolio is invested based on your time horizon, comfort level for fluctuation, and planning goals. That's the prudent way to invest even when the world appears crazier than ever.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. Follow DWM on Twitter @DestinationWM.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.