US Presidential Election Outcome and its potential implications on our Financial World
While the uncertainty associated with a Trump presidency is likely to be the major brake on equities markets, there are also concerns that, if passed, the combination of tax cuts and trade policies would see US budget deficits increase and the economy hurt by retaliatory trade actions. In the short-term, the US Federal Reserve is likely to delay interest rate increases including the potential December hike, in response to the renewed uncertainty.
However, in the longer term, deterioration in the deficit and higher inflation would likely see bond yields rise.
Long term investors may be wary of changing exposure to equities where appropriate asset allocation for their risk profile is already in place. Generally, these long-term investment settings would take into account short-term equities market volatility that comes with geopolitical and other risks. Often, by reacting to short-term events, investors run the risk of miss-timing portfolio changes by selling after markets have already fallen and thereby crystallising losses and then potentially missing the bounce that generally may follow sharp declines.
As a rule, diversification across the different asset classes may provide some natural protection from this type of event. Increased uncertainty puts pressure on equities markets but generally sees fixed interest markets improve as investors seek safer assets.
Long term investors should be wary of changing exposure to equities where appropriate asset allocation for their risk profile is already in place
Is my portfolio sufficiently diversified?
If your investment portfolio is not properly diversified across the different asset classes of shares, fixed interest, property, cash and alternatives, you may wish to consider the benefits of a more diversified portfolio. This is also the case if your portfolio is skewed within a specific asset class.