What would happen to the markets if Donald Trump were to become president?
It’s
looking less and less likely as time goes on, but we have been thinking a bit
about what might happen in the markets if Donald Trump were to be elected
President of the USA.
He
hasn’t exactly inspired investors, and indeed the markets seem to be reacting
positively as his chances of being elected diminish. But are they making a
mountain out of a molehill? A good place to start is by looking at another big
political event in 2016, Brexit.
When
Britain voted to leave the European Union in June this year, the markets were
sent into panic mode. We saw the markets fall, then for a relative short period
movement up and down, as investors decided how they felt about Brexit. After
this period, everyone seemed to realise that Britain wouldn’t leave the
European Union any time soon, that a Brexit takes time, and that the world wasn’t
really burning down. The markets settled back and even rallied higher than the
pre-Brexit levels and calmness was restored.
Why
is this important?
Whilst
Donald Trump becoming President would certainly cause some uncertainty, it is
unlikely that he will be able to dramatically affect the USA or business as
many seem to predict. He does not have control of congress, he does not have
support of much of his own party and as President Obama found out, it is
difficult to enact significant changes or allocate funds for new projects –
such as building a wall between Mexico and USA – with this dynamic.
So
expect some short term volatility if the unlikely happens and Donald Trump
becomes President, but as we always remind Raiz investors, remain calm
and stick to a disciplined investment strategy!
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