Market Comments November - Surprise!
In one of the greatest surprises in U.S. politics, Donald Trump has won the 2016 presidential election.
What does that mean for investors?
Initial pre-market reaction was a drop of more than 5% in stocks, a strong increase in the value of gold, a higher USD and higher oil prices. At the opening bell, U.S. market futures are down about 2% while European bourses are down just about 1%. The initial knee-jerk reaction was much shorter than expected.
We all have questions about what a Trump presidency might bring and which laws the Republican majority in both houses might pass in the coming years. There are some hints that Donald Trump, the candidate, has given during the election campaign and some initial reactions in Europe:
Taxes: He intends to slash corporate taxes to 15% in a major overhaul of the US system since Ronal Reagan. This bodes well for corporates in general.
Infrastructure: He has pledged to rebuild America’s infrastructure. This means more spending and more jobs ( if tax revenues are actually lower, the government may need to borrow more, leading to higher inflation and interest rates).
Healthcare: He has pledged to undo Obamacare. Pharmaceutical stocks are bound to benefit from better pricing power
Climate change: he is not a fan of climate change and environmental protection and therefore oil & gas and fracking companies might benefit
Trade: Trump has shown disdain for trade agreements and European car manufacturer building cars in Mexico for export into the US have been punished initially.
It is too early to tell which policies will be enacted and which pledge will actually be implemented immediately.
Today and the days ahead, we are likely to see movements in stock prices. Markets will always swing during times of uncertainty, but remember: You're a true investor in businesses that create value for customers, employees, partners, and shareholders, and you're looking out years, not days or months.
We will be studying and analyzing companies to understand how a Trump presidency might affect their long-term prospects. If our opinions change on any of our companies, you will let you know.
Zurich 9th November 2016