9-November-2016

trump-tower

Well. That was unexpected.

There is more than enough colourful commentary available.  I’m going to skip all the personal and ethical opinions, and focus on what Trump’s win may mean for investment markets.  More specifically, what it might mean for our investments.

In the late hours of the election and early this morning, North American markets did show some negative sentiment, but as of 11:30am (PST) today we have surprising and significant gains on the day: +0.72% in Canada (S&P/TSX Composite) and +1.1% in the US (S&P 500).

Currently, our biggest challenge is the uncertainty regarding Trump’s undefined policy strategies and vague platform promises. This uncertainty is likely to translate into large ups-and-downs in Global Markets as investors come to terms with the various changes to the status quo.

Very broadly, if successful, Trump’s intended changes to US taxation would support US business development, and therefore US Equity markets. His proposed renegotiation of global trade-deals would create weakness in countries selling commodities to the US, thus negatively impacting Foreign Equity markets.

As a Canadian investor, what do you do now? Assuming that you are in a strategically diversified portfolio – you should probably do nothing.  (Remember, this is my personal opinion and does not replace customized professional advice.)

If you are positioned for the long-term, Trump’s presidency within the US government’s accountability structure is an acceptable risk to an appropriately diversified portfolio. Notably, my own definition of “appropriately diversified” is reviewed regularly but I do not intend to make a reactive change right away.

If you are a short-term investor or nearing retirement, don’t respond emotionally. The risk stemming from policy uncertainty may be an incentive to reduce your risk exposure strategically, gradually and with professional advice.

While the drama continues to unfold, let’s remember to be good to each other.

 

 

JL