America has voted, and in an extraordinary election upset Donald Trump has won the US presidential race. So the question becomes: Now what?
Markets have been volatile, both in the lead up, and as a result of the election. We expect this to continue over the coming weeks amid speculation about his likely policy agenda. As news filtered through of Trump’s likely victory the Australian share market fell to finish the day down 2%. Since yesterday we’ve seen US markets surprisingly rise on the news of Trumps victory which has resulted in the Australian market recovering as well. The ASX is currently above where we started yesterday morning!
While the Presidential election is an important political event, we should remain focused on adhering to your financial objectives, ensuring that your portfolios are well diversified across asset classes and geographies, and continuing to take a long-term view whilst accepting ‘short term’ fluctuations. We understand that it can be hard for investors to ignore such noise in the short term, however it’s the process we’ve used for over 25 years and we think it’s held you in good stead.
As with all event shocks, it will take some time for investment markets to work through the impacts on the economy as well as corporate earnings. We saw a similar reaction following the surprise Brexit outcome in June this year with markets dropping suddenly. Within a few weeks most of these losses were recovered. While we can’t be certain what the future holds, knee-jerk reactions to surprise events can be costly for wealth accumulation and our long term retirement goals.
We believe the medium-term implications for markets will depend on the details of actual policies as Trump takes office early in the New Year. Initial focus on a reduction to tax for all Americans and an increase to infrastructure spending are both seen as positive outcomes. In his outspoken way, Trump has expressed other (questionable) views which may not be so beneficial. Ideally, his appointed advisers will provide guidance in both political and economic related matters given his apparent lack of experience.
We don’t believe a radical change is warranted to your portfolios and despite remaining cautious in the short term our long term investment views remain. Should you have any concerns you would like to discuss we encourage you to contact our office.