“The key to making money in stocks is not to get scared out of them.”
The one certainty when it comes to investing is uncertainty, and as this past fortnight has shown us, markets do not typically like surprises. This is highlighted by the fact that the All Ordinaries in Australia dropped significantly the day prior to the election, and US futures also took an early dive, as illustrated in the chart below:
However, markets have absorbed the surprise, with both the Australian and US markets trading above previous levels. We’ve seen particular strength in the US Dollar against the Australian Dollar as investors expect Trump to be inflationary for the US economy, leading to a faster increase in interest rates:
As investors, it’s now important to look at where the opportunities will lie as a result of the Trump victory. Putting aside the labeling of China as a currency manipulator and policy uncertainty over the years to come, some of the key takeaways for investors are as follows:
- Infrastructure Spending to Rise: Trump has indicated that in order to boost growth in the US, he would seek an increase in infrastructure spending domestically. This will include roads, rail and ports, as well as a wide range of other infrastructure projects.
- Trade and Geopolitical Tensions: Trump has already indicated that he would seek to impose significant tariffs on Chinese imports. It’s currently unclear as to whether he would enforce this policy, but if he does, it will likely have an impact on Asian and Australian markets.
- Immigration to Tighten: Trump has indicated that he would tighten immigration rules, which was highlighted by his idea of constructing a wall between Mexico and America.
- Tax Cuts: Trump has highlighted that he would seek to reduce personal income taxes, and cut corporate tax rates. It is currently unclear how much of this will actually come to light.
Given the earlier Brexit outcome, investors should not be terribly surprised by the news of the Trump victory. As investors, we should remain focused on long-term strategies and wait for opportunities in the markets as the one certainty is further uncertainty, and Trump will likely create further investment opportunities in global markets.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Independent Fee-Based Financial Adviser with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
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Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.