Jack Bogle, the founder of Vanguard Group and father of index investing, doesn’t see the “Trump trade” lasting forever and cautions investors to avoid chasing returns.

Asked about a potential rotation from bonds to equities, Bogle agreed that the markets seemed to be embracing a potential increase in government spending under a President Trump.

But he warned not to read much into speculative bets early in a political transition.

“They are, but they are making it mainly on the short-term outlook,” Bogle said, reminding viewers that Donald Trump is nowhere near enacting any kind of infrastructure program.

In recent days, the president-elect has reiterated his intention to spend $1 trillion on America’s roads, bridges and highways in a bid to boost the economy, projects for which he’ll need Congressional backing that is far from assured.

“He’s basically a new Keynesian,” Bogle chuckled. “But that can’t go on forever.” Meanwhile, America’s economic woes, including trade, climate change and employment, are long-term problems, Bogle said. Most stock traders are unconcerned about the long term by their nature, he said.

“The market is very focused on the short term and the heck with the long term,” Bogle said. ‘”We’re in a balancing act between long and short. In the long run, it’s the fundamentals that apply.”

He also dismissed the notion that the potential for change in Washington meant that it was time for investors to abandon diversification and indexing and instead participate in a “stock picker’s market.”

“I always laugh when I hear about a ‘stock picker’s market.’ There’s in fact no such thing,” Bogle said.

“If I’m a smart picker, somebody out there is a dumb picker. I buy stock from somebody and they sell it to me. We’re just making opposite picks about what’s going to happen. Investors as a group inevitably gain the return of the total stock market and they lose by the amount of their costs.

“This is fundamental indexing theory, but that is the way the market works. We all zero out with the market’s return, less costs.”

The Trump election victory certainly reminds me of the recent Brexit vote, and not just in the unexpectedness of the outcome.

A lot of investors panicked over the recent decision by Great Britain to leave the European Union. Some even dumped foreign shares on the expectation that volatility would increase.

These were unnecessary, knee-jerk reactions to a headline. What followed instead was a very long and hard political discussion within Britain, a change of leadership and then the start of a very long and complex divorce process.

It’s still not clear that England will actually leave the EU, whatever the referendum said. It might remain in the deal under different terms or even decide to put the whole decision up to its parliament for another vote. Who knows?

Reality sets in

You can expect similar dithering from the incoming administration here at home. Whatever direction is taken by a new White House on the issues of healthcare, trade, climate or security, it will start out sounding dramatic and market-moving, for sure.

Then reality will set in. The hard legislative trade-offs will have to be negotiated, and finally an actual policy will begin to take shape. We’re months and maybe years away from that.

In the meantime, a million other, non-political factors will continue to percolate in the background.

Currency movements, earnings, inflation, trade, the inner workings of each company, the economy itself — far too many moving parts to clearly suggest an answer for investors to act upon.

That’s why index investing works. By not attempting to “guess right” the impacts of a million small decisions, by keeping costs low and investing simple, the retirement investor inevitably comes out with the highest possible return year after year.

No stock picking needed, no guessing required.

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