Such social and political upheaval has been a gift for the news industry, both those attempting to mislead through the perpetuation or insinuation of fakery, and those attempting to cut through it to make sense of what is really going on in the world. At the IC we are firmly in the latter camp, having made the decision that to depoliticise our coverage is the only useful approach for those looking to manage money. Investing otherwise – based on what you believe in rather than what you know – seems a recipe for bad decision making, and as we head into another year dominated by divisive issues, I would urge all investors to remain as dispassionate as possible.
Indeed, a dispassionate assessment would suggest that, for all of the invective directed at Mr Trump, his first year in office has been an undeniably good one for the US economy and investors worldwide. Perhaps low expectations can explain some of the strong US performance this year, perfect compost for market-boosting upside surprises. Indeed, very little of this strength has yet been the result of direct Trump policy, but that may not be the case in 2018 if his tax proposals make it into US law – a huge windfall could add further fuel to the ageing US bull run. The US market is too expensive to comfortably buy right now, but with the prospect of those tax cuts it is equally too risky to short.
We should be cautious, however. As Simon Thompson revealed in his first book, Trading Secrets, the second year of a presidential cycle is statistically the weakest, and failure to reform the US tax system could be one outcome that stops the market in its tracks, because at least some of the upside of tax cuts is already baked into US share prices. Conversely, UK share prices are pricing in the political worst-case scenario of a disorderly exit from the EU and a new, left-wing government – but my suspicion is that economic pragmatism will prevail, and the Corbyn threat will fade.
Of course, that is just a guess, and the main point to make is that investors should be prepared for whatever twists and turns may lay in store. Containing nearly 50 pages of analysis of every major asset class, our bumper double issue should help you cut through the noise to do just that. Merry Christmas!
