If you are interested in politics, you would have seen all the hype about the US election over the last few months. The polls predicted a very close race between Donald Trump and Kamala Harris, but it ended up being a landslide win for Trump.
If you are interested in investment returns, you would have seen the equity market reaction in the US on Wednesday last week. The S&P500, Nasdaq and Russel 2000 raced to all-time highs, buoyed by the expectation that Mr Trump would reduce both corporate taxes and the regulations on American corporations.
As of last week Friday, the Nasdaq was up 28% year to date and 41% over 12 months. That is a good rebound after a poor 2022. Mr Trump is not very pro rest of the world and will focus on making America the best country in the world. This will include putting big tariffs on any imports into America from countries like China and Mexico; making it difficult for people wanting to enter the US; and favouring any company that produces its goods inside the US borders. The backlash will be higher inflation and most probably an increase in the US debt. This will result in interest rates not coming down as fast as we all hoped for and negatively affecting our bond holdings.
But, as before, we cannot predict what will actually happen in the future and there will most likely be something else that upsets the apple cart. This is a time to re-evaluate your investment portfolio. Make sure that you have enough liquidity to see you through any volatility in equity markets. Make sure that you do not become too conservative and hoard cash in anticipation of a downward market correction and make sure that you are well-diversified between different asset classes, geographies and currencies.
