This partly reflects the idea that to elect Trump would be a step into the unknown, not just for the US itself but – given his antiglobalisation rhetoric - the many countries with which it does business. Like remaining within the EU, Clinton represents the status quo and – no matter how flawed she may seem, especially to to the disenfranchised masses who see her as a figurehead for the forces that have left them behind – that’s the kind of certainty markets like. The sell off of the last couple of days is a sign that the market had priced in a Clinton victory and does not want to be wrong-footed again.
But – putting aside any personal views of Trump’s suitability to become the most powerful man on the planet - should we really be so fearful, in economic or stock market terms at least, of a Trump victory? Many speculate that should he win, it’s unlikely that he’ll have the support in the Washington ‘swamp’, as he calls it, to enact many of his wilder election promises. In that respect, the status quo may in fact persist for some time and any short term sell off may prove temporary, as proved the case in the wake of the UK referendum, and a time to snap up quality shares indiscriminately dumped. Others suggest that some of his less controversial policies may even provide a boost to corporate America and the markets, lowering taxation and postponing any interest rate rises.
Yet a Trump victory could embolden other populist movements worldwide, and this could indeed prove a drag on economic growth and stock market performance the world over, as we recently discussed in our feature ‘Foolproof your portfolio’ (2 September 2016). We also provided some guidance as to how to defensively position your portfolios for such an eventuality, including taking an overweight allocation to gold – which has been rising again since Trump’s poll resurgence, a reflection of its safe haven appeal. And even if such populism fails to take hold – which seems unlikely - investors would still do well to introduce some safety valves into their investment approaches, especially if we are fast approaching a cyclical downleg, as leading fund manager Julie Dean, interviewed on page 50, believes. One such safety valve is diversification, the subject of our forthcoming seminar, Ports in a Storm – that it sold out weeks ago highlights a growing recognition that there are likely to be turbulent times ahead.
