In the immediate aftermath of Donald Trump’s election investment markets reacted much the same as most people did: with shock.
When news came through of his victory the sudden falls on the share markets provided a clear demonstration of how much market movements are governed by investors’ emotions.
The falls were short-lived, however. As Trump took the stage to deliver his victory speech it was remarkable to see the markets turn around as investors started pouring money into investment sectors they thought may benefit under a Trump administration.
The healthcare sector was the strongest performer, as pharmaceutical companies saw the defeat of Clinton as raising the possibility of the removal of obstacles to price hikes in the drug sector.
Financials also jumped on investors’ hopes for less regulation of the banks.
Here are some of the questions that investors and our members are now asking about what a Trump administration could mean longer term for investment markets and their super.
Q: What will a Trump administration mean for the economy and investment markets?
A: Optimistic commentators are pointing to Trump’s plan to lower taxes and increase infrastructure spending as having the potential to boost GDP and corporate profits, which would be good for US shares.
There is some concern about the potential for a trade war that could upset the exchange of goods and services among global trading powers. Trump has argued that America’s current trade deals—specifically with China and Mexico—are unfair to American workers, and he has threatened to limit access to American consumer markets unless the deals are reworked. This feeds into some growing global concerns about the perceived costs of free trade. Those concerns are likely to limit the potential for any new free-trade deals to win approval.
Q: What is REI Super doing to minimise the impact on my super from market volatility caused by Trump’s election?
A: We had not positioned our investment portfolio based on any guesses about the outcome of the US election, and therefore we didn’t need to take any corrective actions when the surprise result occurred. Our portfolios are driven by long-term valuation-driven investing. AT REI Super our strategy is to:
- Diversify across a range of different types of assets, countries, industries and currencies;
- Invest less when markets are expensive and invest more when they are cheap;
and
- Identify investments that offer good value and a good return for their level of risk.
Events like this make us glad we’re not peering into a crystal ball and betting members’ savings on our predictions about the future.
So our investment process continues as it always has. We are looking to buy assets that are selling at a significant discount to their fair value. Negative sentiment and heavy selling, often driven by fears of what might happen, have historically created the best opportunities for value investors. While we never wish for markets to crumble, we stand ready to profit from any such opportunities that present themselves.
Q: Should I switch to a less risky investment strategy in my super account?
A: We don’t recommend switching your investments on the basis of short-term market volatility, as super is a long-term investment for most people and it’s important to ride out the short-term peaks and troughs in markets if you want to get ahead in the long run.
As always, we urge you to talk to a member of our financial advice team if you are concerned about the impact of market volatility on your super. An adviser will be able to give you personal advice that is based on your own situation and goals. Please call us on 1300 13 44 33 if you would like to make an appointment to speak to an adviser on the phone, in person or via live online video.
Please note:
The information contained in this article does not constitute financial product advice. However, to the extent that the information may be considered to be general financial product advice, REI Super advises that REI Super has not considered any individual person’s objectives, financial situation or particular needs. Individuals need to consider whether the advice is appropriate in light of their goals, objectives and current situation. Members should obtain and read the Product Disclosure Statement for REI Super before making any decisions.