This year has just been full of surprises hasn’t it!!!

The only thing we now know for certain is that polling companies couldn’t pick a winner in a one-horse race.

We haven’t sent any communications recently as we have been doing some work on our website, which is still underway, but there are certain events we feel it is our duty to provide some commentary.

I would refer you to the comments of Lothar Mentel CEO of Tatton Investment, one of our key investment partners, which he sent us first thing this morning

Just like back on 23 June, we have woken up to an electoral outcome few thought possible. Donald Trump has won the US presidential election. Asian stock markets have fallen by as much as 5% and European and US markets are heading in a similar direction.

So given the much larger size and influence of the US in both political and economic terms do we have to brace ourselves for a bigger and longer lasting shock to capital markets than after the surprise of the Brexit referendum?

Given Trump’s lack of governing experience and outsider status, his election will indeed mean far more uncertainty about the future direction of US policy than Hilary Clinton. Risk asset markets can’t stand uncertainty; hence why stock markets are falling.

However, taking a step back and with the post Brexit vote experience behind us, a collapse of and lasting turmoil in global stock markets as a reaction to the election of Trump is not my central case of probabilities. I believe that it is far more likely that after the initial shock – predominantly on the side of foreign investors –  markets will refocus on the likely realities a president Trump would face. Just as president Obama was quite limited in what he was able to achieve under the constraints of Washington’s administration apparatus, so would a president Trump.

The strengthening of the US economy which was further evidenced over the last week by improving corporate profitability, rising employment, better business sentiment readings and the central bank indicating a December rate rise, is highly likely to bring market emotions quickly back to a very different reality. One of persistent, steady economic growth, which so far has withstood so many headwinds over the past years that an overpromising Donald Trump is unlikely to significantly derail it either – certainly in the short to medium term.

Those who are fearful about the short-term value development of their investment portfolios, should think back to all the doomsday market scenario predictions ahead of the Brexit referendum and take note that there was much less of this type of comment before this election.

In his acceptance speech this morning just before 8:00 Donald Trump already changed his tone significantly from his trademark divisive style to a far more conciliatory one. He invited the whole nation to come together and unify to move the country forward with great tasks ahead, mentioning among other things the rebuilding of US infrastructure. Notably his more aggressive campaign statements of building walls and expatriating illegal immigrants were absent.

I have observed Donald Trump as a populist and demagogue, but I am not convinced that he is as dangerous as many see him after all the terrible campaign statements he has made. He strikes me as a man who has to win against all odds and will therefore tell his electorate whatever he believes they want to hear. However, he has already also shown that he is more than willing to twist reality to align his later actions to previous outrageous promises.

As a business man he is a pragmatist and while his hot headedness is worrisome, it passes. The Washington apparatus and the many checks and balances the US political and security system has, should restrain his short temperedness.

 

I seem to remember similar fears of US politics descending into uncontrolled populism during the election campaign of Ronald Reagan in 1980. His Hollywood style of ‘sweet persuasion’ of the American public with some quite worrying prospects for a rekindling of the worst of the cold war also made many international observers quite fearful.   I am not expecting a President Trump to ever being able to live up to the political standards of the late President Reagan, but US politics must never be judged by the first impression.

Keep calm and carry on, is my advice in these interesting and sometimes disturbing times. The global economy is going strong and there is little reason to believe that the recent strength of the US economy will falter over the short term.

In terms of our management of client portfolios we will continue with our disciplined and level headed approach which takes its direction from the realities of the economy and corporate results, rather than short term emotions that drive the volatility of markets.

Donald Trump and the Washington establishment have a formidable challenge ahead of them, but also the opportunity to quell the discontent that appears to have taken hold not only of the US, but of the majority of Western societies. Herein also lies the opportunity for the global economy – if politicians understand this as the final wake up call to rebuild confidence and re-accelerate economic growth through fiscally driven investment programs, then what may seem to many as a dark hour may actually turn into a starting point for much needed change in fiscal policy – worldwide.

Apologies for the length of this post but I felt that all of Lothar comments were relevant given the importance of this event.

As always we are here to chat through this or any other subject, but as with BREXIT it is steady as she goes while we see how events unfold.

On a personal note, I think I may try staying up through the night next time there is a vote as going to bed trusting the result has not worked out in recent times.