WHEN THE DUST SETTLES

When the dust settles, you see where you have been. What will ‘we’ see?

The election of Donald Trump has certainly thrown a lot of political cards into the air and I can’t think how they are going to fall. Was his outrageous political campaigning just a marketing strategy or was it belief? I suspect the latter and this is what the world fears right now. So, how do we move forward from here?

What information can I/we use to help you when we don’t know ourselves? In some ways this is exactly the same as the BREXIT vote. Unchartered territory.

So, you would be forgiven for thinking that with this election result your investment strategy would need to change. You would be wrong!
The world is waiting to see what Donald Trump will actually do and not just what he says he will do, but in the meantime all the market makers around the world, all the buyers and all the sellers of shares, bonds, property and commodities, are exchanging views and making deals based on what they expect to happen in the future. That will include the outcome of the election but it is highly unlikely that any of them will be able to gain an edge by predicting what Donald Trump is planning to do next (does anyone have a clue?)

The reality is that US presidential elections have very little impact on the financial markets. They are predictable events and by nature they:

a) very rarely alter the mood of the buyers and sellers because by the time you are aware of the good or bad news, the rest of the market knows it too and they have already incorporated it into price and

b) it is actually unexpected news that affects prices, because by definition, the unexpected is impossible to predict.

So, rather than play expensive games, over information which we have no control, it is better that we continue to recommend investing based on:

Minimising cost

Creating an investment plan based on your own set of circumstances

Using asset managers, where possible, to capture growth and limit falls.

And diversify sufficiently to avoid the negative effects of any one asset type.

I ALSO WORRY ABOUT THE FUTURE!

I also have the same fears about investing that you might be feeling right now. The uncertainty. I do suffer them as well. However the risk of all your money being lost down a financial black hole never to be seen again is very unlikely to happen. This kind of fear does not play a part in defining how and why you invest or what you should do with your money.

SO WHAT CAN WE DO?

All our client portfolios are managed by third party asset managers or monitored by The Spectrum IFA Group portfolio team.

Right now, our asset managers are holding and increasing their exposure to gold in the portfolios, as a security measure. Gold normally performs well on the back of uncertainty and so depending on Trump's actions we can reasonably expect that this will rise.

We recommend that no one has any large exposure to Bonds: Government or corporate. Donald Trump has already stated that he will unravel the long term low interest rate environment and so we can reasonably expect that interest rates and inflation are set to rise. Bonds will suffer hugely in this environment and will unravel a 30 year profitable run in Bond investing. (As this goes out to you a tumble in Bond markets has already begun)

Equities/Shares. Volatility will prevail but if any asset class looks certain to perform under the conditions of inflation and increasing interest rates, then equities are near the top of the list.

Property. I have read a few articles already on property and whilst most seem to think that house holders will feel the pain more than most there are a few that suggest that property in the USA, under the leadership of a property mogul, might flourish. The Jury is out for me on that point, only time will tell.

And lastly, commodities (excluding gold). They have suffered from huge falls in recent years as deflation worries rose. If that tide is about to turn then it could favour commodity prices greatly.

THIS IS NOT THE END, FAR FROM IT.

I have to confess that I did admit to my wife that I thought Donald Trump would win the presidency. To wake up to the news was still a shock. But, I also have to admit that I like some of what he is saying, it’s just him saying it and he can’t be trusted! Interest rate rises and an end to quantitative easing and financial austerity are a good thing, in my opinion. Unfortunately governments have 'never', in recorded history, been able to control either effectively, and so we can expect that once they start they will run out of control and we may enter a period of rising inflation. This will hurt the poor and those on fixed incomes (retirees etc).

However, it should benefit investors, which will help to offset those falls in other areas. Now has never been a better time to review your family and investment plans to make sure they protect you in the down turns and profit from the rises.

Clearly, if any of this news is getting you down then you can contact me. I am always happy to talk over the details and answer any questions you might have. You can reach me on gareth.horsfall@spectrum-ifa.com or on 3336492356.

Anyway, since the world order is being realigned and the future a little less predictable I thought I would leave things on a lighter note.

SO, HERE IS MY PREDICTION  FOR THE FUTURE:

Renzi wins the Italian Referendum with a ‘Si’ and the world turns to Italy as the sensible man of the world. Italian shares end 2017 the best performing of the year. Any one fancy a bet?