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And the Field Goal is Good!


Trump wins, Trump wins, Trump wins! On the last play of the game, Team Trump converts on a 59-yard field goal to beat Team Clinton 22-20. Like with so many other championship teams, Team Trump was soon off to the White House to be congratulated by the President.

Trump's victory was viewed by many, particularly in the press, as a shocking, highly unexpected event. Pollsters were slammed left and right for being 'wrong.' I don't want to come across sound smug, but I wasn't surprised by Trump's victory. And I don't think that the pollsters were wrong either. Let me explain.

As my Monday, pre-election blog post stated, the polls showed Clinton in the lead. But the polls are based on sampling of a small subset of likely voters ahead of vote, and thus they come with a margin of error. The polls for this election probably came with a larger than normal margin of error given the rapidly changing news flow in the latter days of the campaign, specifically the FBI's reopening, and then re-closing of its probe into Clinton's private email server. So even though Clinton was ahead in the polls, the lead was narrow and the margin of error was higher than normal. As we stated in the blog, FiveThirtyEight, an election forecaster grounded in proper use of statistics, put the odds of a Trump victory at 31 percent the day before the election. Those are the same odds of an average NFL kicker making a 59-yard field goal (implying the ball is hiked from the 42-yard line). As anyone who knows their football, and I appreciate that many in my international, and even American, audience don't, a kick from this distance is very 'doable' and is made all of the time (about 3 times in every 10 attempts). My point in using an NFL field goal attempt as an analogy for the election was to demonstrate that while Trump was not expected to win, it wouldn't be too surprising if he did.

Predicting election outcomes, like predicting investment outcomes, is not a black and white game, but rather one of shades of gray. Being wrong in predicting any single event is common, but those who stick to their statistics are likely to be correct over the longer term when many events are being wagered. This is a point I try to make about the investment advantage awarded to those who have long-term investment horizons in my Long Time Horizons blog post. Think of it this way, you only have a 50% chance of being right in picking one coin flip. It's a binary outcome where you have equal chances of being seen as either brilliant, or completely ignorant. But if the game is extended to 100 coin flips though, you have a very good chance of being seen as brilliant by guessing that there will be about 50 heads, and 50 tails. I know which game I would rather play with my life savings.

So, the outcome of the election shouldn't have been as surprising as it was. This is especially true after we all saw the same storyline play out only four and a half months ago in the United Kingdom. I think my day-after response about why the Brexit vote result occurred, titled Brexit & Populist Anger, is valid for the US presidential election result. Just do a mental find/replace on Brexit/Trump, and it works.

Learn about the market reaction to Trump's victory, what it means, and where we go from here.


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