For months there has been speculation as to the impact a Trump victory would have on financial markets – and it is fair to say that expectations were negative. Yesterday the market dropped 150 basis points on the prospect of a Trump win. Now we have woken up with this being a reality, and the question arises – where to next for financial markets?
Remember there was much concern that a “Yes” Brexit vote would be a disaster for shares and the global economy, but what actually happened was an initial knee jerk sell off but after a few days global markets moved on to focus on other things and shares rallied.
While Trump’s victory will come as a bit of a shock to many, there is a good chance that economic realities and the checks and balances provided by Congress will see his policies become more pragmatic, so there is a danger in making too much of the US election. It’s also worth noting that recent global growth indicators have been improving – both business conditions and profit indicators – and this along with continuing ultra-easy global monetary policy provides support for investment markets in the face of short term political uncertainties.
Finally, while the Presidential election is an important political event, we advise you to stay focused on your longer term financial objectives, and to maintain your diversification in uncertain times. Short term impacts on financial markets are not possible to pick, the significant ASX turn around only a day after his win proves that point.
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