Donald Trump has won the US presidential election and Republicans retained their majorities in both the House of Representatives and the Senate.
This result can create a range of social, geopolitical, economic and market risks. The full picture will not become clear for months, leaving us in an environment of heightened uncertainty and accompanying market volatility.
Our focus on behalf of our members will be to monitor and assess how Trump settles in as President of the United States and consider the impact on long term expected returns.
From an economic perspective, many of Trump's policies, such as cuts to income and company tax rates, and increased spending on infrastructure and defence, could be positive for growth. This would mark a shift to a more ‘stimulatory fiscal policy’ or greater government spending.
However the largest risk to economic growth in a Trump Government is trade policy. One of Trump's major campaign policies was the creation of protectionist trade policies, for example imposing large tariffs on imported goods. This could have negative consequences for global economic growth.
Markets, particularly share markets, are nervous about the result. It’s likely that in the short term we’ll see large swings, both negative and positive, based on short term news and opinion regarding the Trump presidency. While there are short term risks to the downside, any milestones which settle nerves could easily lead to a sharp rebound in markets. Examples include Trump appointing respected advisers or pulling back on some of his more extreme policy measures.
Events such as the US election result are a normal part of the investment cycle. As super is a long term investment, it’s important to take a long term view and not let short term events lead to rash decisions.
Here at Mine Wealth + Wellbeing, we keep this front of mind when making investment decisions and structuring our portfolios.
Our long term view for markets hasn’t changed significantly from previous updates. A key part of our work is to consider the range of possible market outcomes following events like these and structure our portfolios and investment options around this.
We’ll continue to follow events closely and make investment decisions in the best interests of members.