In years to come it may be that historians and political commentators look back on 2016 as the year when the rise of anti-establishment politics really began. Whether it be the vote for Brexit in the UK or the election of Rodgrigo Duterte as Phillipine President. All this will surely be Trumped, in every sense of the word, by the election of a billionaire reality TV star to the highest political office on the planet. This pattern may not be ending any time soon with elections due in major economies like France and Germany next year and signs that anti-establishment parties are also polling higher than expected.
In the short term however what does this all mean? Global markets have reacted badly in early trading and have fallen heavily, it will not be just US holdings that are hit. This is not surprising, and it should be remembered that a similar thing happened around Brexit before markets recovered. Many may therefore see today as a buying opportunity. That is not to say that this will be anything like Brexit, but it may provide a useful indication. The inevitable truth is that investments will be worth less at the end of today than they were yesterday.
Despite having an allocation to the US in most portfolios, in the short term we do not anticipate making any changes to our portfolios on the basis of today’s result. Donald Trump will not ascend to the US Presidency until next year, and even then change (if he is even able to enact anything) will be gradual. What we are currently seeing in the markets is a reaction to the uncertainty rather than a clear indication of what is to come. The US remains one of the most dynamic and important economies in the world, and only in the most extreme version of a Trump Presidency which sees him ripping up trade deals and defaulting on government debt is this going to change.
It is important at this moment to re-emphasise our belief that timing of the markets is impossible, we believe that time in the market is what matters. Yes, investments will go down today, but they will recover, we just don’t know when this will be.
We would like to repeat the message that we gave following the Brexit vote, that for the moment we are happy with our portfolio positioning, and nothing that has happened in the past twenty-four hours has changed that. This does not mean that we will not continue to work hard to ensure our portfolios remain appropriate. We monitor the risk levels of each portfolio on a weekly basis to check that it still remains within bounds and should that change we will communicate our recommendations. Our analysts will be paying special attention to the effects of the election on the long term prospects of the funds we recommend.
As we did in June we will continue to monitor our portfolios during the inevitable volatility whilst we wait for the dust to settle.