The U.S. Elections – The Morning After
Now that the long awaited and anticipated U.S. Elections are over, what now? As improbable as it might have seemed to many, Donald Trump has won the Election and is now the President of the United States of America. We’re not going to get into the entire historical analysis and significance of this situation, but rather people are asking ‘what now?’ and more specifically, ‘how does this affect me?’
As Trump inched closer to a victory, global markets started to take a deep hit, with some markets falling as much as 5% in just the day. There seemed to be some panic in global markets as well as North American markets as to the fallout of the election and what sort of implications it would have. This seemed to be caused mostly due to the ‘fear of the unknown’, which often causes markets to push downwards. Now, although nobody can really tell exactly what will happen or exactly what changes Trump will/can make, there needs to be an understanding of some of the implications from this result. So, what can we expect?
Looking ahead, we can expect changes (some more drastic than others) when it comes to foreign trade. Trump has publicly said he wants to re-negotiate the North American Free Trade Agreement (NAFTA) and wants to exit the World Trade Organization (WTO), as well as start imposing tariffs on goods coming into the country. This could cause price of goods to increase around the country, increasing inflation and potentially slowing down the economy in the short term.
We can expect some short term volatility in markets, as the ‘uncertainty’ looms over us, similar to what was experienced during BREXIT. The expectation is that there would be pressure on U.S. growth as well as the U.S. Dollar.
However, the news is not all negative! There are some industries and sectors which are expected to be positively affected by this outcome. Biotech and Pharmaceuticals are expected to benefit, as well as Energy, with the expectation of the Keystone Pipeline to move forward, creating thousands of jobs. This in turn would also be a positive for Canada’s oil/energy sector which should also create many jobs on this side of the border.
The Financial Industry, and more specifically the Big Banks should fare well, as well as Drug Makers and Tobacco companies. Infrastructure spending is expected to be hefty over the next 10 years, which would benefit companies involved in infrastructure, engineering and equipment.
The industries that are expected to be negatively affected are hospitals and managed care, as Trump has vowed to get rid of Obamacare. The Alternative Energy sectors would also be considered as being negatively affected, as Trump generally does not believe in climate change and likely would not support ‘green initiatives’.
Interest rates are also likely to increase in the U.S. as well as spending, which would increase the U.S. debt over the coming years. There also seems to be some uncertainty in regards to the Federal Reserve’s policies going forward as there may be a change at the helm over there in the next couple of years.
What does this mean for Investors?
Firstly, we must understand that markets tend to overreact to events, both positive and negative. Although we can see some short term volatility in the markets, that doesn’t necessarily mean that you should sell your investments or move into cash. Having a long-term focus is often the best option for clients as well as maintaining a Tactical Money Management approach. This will allow your Portfolio to take advantage of any market upswings or downswings, as well as take advantage of opportunities in other markets, industries or currencies.
Now, does this mean that you continue to stay the course in your current investments? Not necessarily. Volatility can also be seen as ‘opportunity’. The best course of action would be to review your Portfolio with an Elite level Financial Advisor to ensure that your Portfolio provides you with both an offensive strategy, as well as downside protection, regardless of the market conditions.
If you would like to review your Investment Portfolio and Strategy, get in touch with us and we would be happy to do so. We can show you how to structure your Portfolio to take advantage of opportunities and changes to the market, as well as protect on the downside.
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