Donald Trump’s election has come as a surprise to many, even in this neck-and-neck, back-and-forth campaign. While no one could guarantee the outcome of the election before the ballots were counted, it was far easier to predict the volatility that we’ve seen since last night.
Markets hate uncertainty, so what we are seeing now comes as no surprise. However, it’s important to keep a long-term perspective and remember that the markets are tremendously resilient. Just a few months ago, markets were roiled immediately following the Brexit referendum, only to come back strong within just a few days. Ultimately, fundamentals matter, and as always, that’s what our investment teams are focused on—fundamentals.
In regard to the economy, Donald Trump’s victory also echoes Brexit, and speaks to a widespread desire for change. It is my hope that the Trump administration will focus on developing fiscal policies that incentivize entrepreneurship, private sector growth and taking responsible risks with capital.
What would more effective fiscal policy look like? In my view, it would include reasonable taxation and a sensible level of regulation—clear and simple rules that allow for fair play. Within the U.S. economy, we particularly need more fiscal policy that encourages capital to flow from banks to small businesses. As I’ve discussed in past posts, small businesses are a vital engine of job growth—so policies that support this segment of the economy can have a real impact on overall economic growth.
Looking globally, we can’t lose sight of the saying, “capital goes to where it is treated best.” The United States’ relationships with its trade partners and its approach to multi-national companies have many facets and must be evaluated accordingly. I encourage President-Elect Trump and Congress to continue to recognize that we are stakeholders in a global economy.
As market participants work to identify the winners and losers in this new chapter of American politics, we must be prepared for volatility spikes. This may extend over a period of many months, as the Trump administration begins to shape its policies.
While markets haven’t been in this exact place before, they’ve navigated many unknowns to climb the wall of worry. As the Greek philosopher Heraclitus said, “change is the only constant in life.” As an investor, I would add that this change constantly creates opportunities.
For related resources, see:
Volatility Opportunity Guide