One debate down, 2 to go! With a little over a month remaining before Americans cast their votes for President, the question being asked is "what would a Donald Trump Presidency mean for my portfolio?" To answer that in 100 words or less would be difficult, though a number of outcomes have a high degree of probability.
First, market volatility would increase, possibly significantly, as investors position and re-position their portfolios to adjust for identifiable risks that could affect the global economy and capital markets. The re-opening or cancelling of international trade agreements could, in a worst-case scenario, ignite a trade war with disastrous consequences.
Second, safe-haven investments including government bonds, gold and hard currencies including the Swiss Franc would benefit. Nervous investors would shift assets to safety to protect their portfolios, causing a re-pricing of higher risk assets lower. Shares of blue-chip global multinationals would be affected, affecting virtually every investment portfolio -at least in the short term.
Third, the Chinese economy would suffer. Currently, China's exports to the United States are over $400 billion per year, a significant chunk of their economy. It is unlikely that they would be able to find markets to replace affected exports to the US, causing factories to close and unemployment to rise. The ripple effect on other emerging economies would be severe and ultimately the Developed World would be affected too.
Though this assessment is both sobering and serious, it is important to remember however, that just because a politician takes a position when running for election, it doesn't mean that they are going to follow through on it once elected. A Republican dominated Congress does not mean that any of Trump's policies will become law. Political capital is finite, and if elected, Trump will have to focus his energies of those priorities that he considers most important and politically achievable. Four years is a short time in office and we are of the view that a $20 Trillion economy is going to survive just fine, regardless of who emerges triumphant in November. We are watching the situation closely and remain committed to our defensive portfolio positions that emphasize safe-haven assets, capital preservation and investment returns through yield. Capital gains may take a hit in the short term, but looking down the road, we remain confident that our asset allocation models will help our clients achieve their financial goals.
Still worried and up late at night over the election? Please call me at anytime.
The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc. This publication is solely the work of Martin Weiler for the private information of his clients. Although the author is a Manulife Securities Advisor, he is not a financial analyst at Manulife Securities Investment Services Inc. This is not an official publication of Manulife Securities. The views, opinions and recommendations are those of the author alone and they may not necessarily be those of Manulife Securities. This publication is not an offer to sell or a solicitation of an offer to buy any securities. This publication is not meant to provide legal, accounting or account advice. As each situation is different, you should seek advice based on your specific circumstances. Please call to arrange for an appointment. The information contained herein was obtained from sources believed to be reliable; however, no representation or warranty, express or implied, is made by the writer, Manulife Securities or any other person as to its accuracy, completeness or correctness.