Trump v the market
While we don’t regularly promote the words of market commentators verbatim, we believe the article that follows perfectly encapsulates the message that Elodus has lived, breathed and reinforced over the last 12 years. We know this is true – it’s been ably demonstrated time and time again. Believing this has meant that our clients have benefited from having good quality, well diversified portfolios of growth assets – this has gone a long way to helping them achieve their financial and lifestyle goals. The Dow Jones hit 19,000 points on Wednesday (23/11/16), an all-time high. The same was true of the S&P 500 and the NASDAQ. While the Australian sharemarket still has some way to go to achieve the same heights, it will. So relax, keep up the good work and believe in the future and what you are working to achieve.
“The past two weeks should have provided some great lessons for investors. The fun began with the US political polls predicting a landslide Clinton win and investors becoming optimistic.
Then, as the chances of a Trump victory increased, the mood changed to “I’d better sell my shares in case that awful man gets in”.
Once a Trump win looked certain, markets plunged and those who got out early felt vindicated. We all know what happened next: the markets had their biggest rise in 5 years!
But the big joke was on those who fled to the “safety of gold and bonds”. After an initial rally, gold prices fell and bond yields rose – this meant bond holders took a bath. About $1.2 trillion was wiped off the value of bonds worldwide, while shares added about $1 trillion as base metals leapt.
None of this was any surprise to grey-haired investors like me. We have seen this volatility many times.
Here are the lessons: first, nobody has ever been able to consistently pick the direction of the stock market; and second, anybody who seriously thinks that gold and bonds are a safe haven needs a reality check.
Love him or loathe him Trump is going to be a very different US President, But, given half a chance, he may give America the shakeup it needs. Trump is not the kind of person to take no for an answer, so expect to see increased spending on infrastructure, coupled with a rise in interest rates.
This should be good for stock markets worldwide.
Just keep in mind that six months from now the US election will be a faint memory and the media will go back to focusing on Brexit, the forthcoming elections in France and the continual fighting in the Middle East.
Get yourself a good portfolio of assets and stick with them. The end of the world is not happening yet”
This article was written by Noel Whittaker and published in the Courier Mail on 20 November 2016.