Trump and your money

For the second time this year Brits have woken to an unanticipated and thoroughly disconcerting political and economic situation that has sent shock waves around the world. But does it make the blindest bit of difference to your money?

Forget the temporary suspension of sanity, what does a Trump win mean for your money? (AP)

You woke up on Wednesday morning with one word one your lips as rolling news images of jubilant middle aged white men in ‘sports jackets’ and dubious headgear made way for Bloomberg screens sliding from green to red.

That word - at least the clean version - was probably “What?”

Not known as big fans of surprises, global stock markets initially echoed your sentiments as investors fearing for the future of the free world began ditching dollars for safe haven currencies, dumped renewables for commodities and bought up gold like life depended on it.

It was carnage – for all of an hour.

After all, regardless of what nightmare they may or may not have just unleashed, America will still get up this morning and go to work, businesses will still function. Capitol Hill will still stand.

As one analyst put it, ‘Initial stock market reaction to the Trump victory was a short intake of breath, followed by a shrug.”

That said, as the pundits are fond of saying, the world changed last night, and it would be wrong to believe that one result thousands of miles away will have no effect on our personal financial circumstances.

So does the dire dollar represent a buying opportunity? Is it time to pile into precious metal? Or should you invest in tinned goods and head for the hills? Here’s our pick of the experts’ best guesses.

On the economic effect

“The election of such an apparently unpredictable character to be US president is a major surprise for markets, and comes ahead of a series of important European votes, starting with the Italian referendum on December 4th," notes Ian Kernohan, Economist at RLAM. "As with the Brexit vote, it’s yet more evidence of a sense of disaffection with the political establishment.

“While Mr Trump’s mandate is clear, the exaggerated rhetoric of a political campaign often gives way to the realities of power. Many US Presidents find themselves constrained by Congress, and while Republicans will be dominant on Capitol Hill, the new President is not representative of his party on fiscal policy or free trade, his two key platforms.

“Mr Trump's fiscal stimulus plan would be supportive for US economic growth, however with trend growth lower thanks to a productivity shortfall and structural demographic pressures, it is difficult to see the US economy growing much more rapidly without running into overheating inflation, and a more hawkish Fed, although Mr Trump’s election may delay a December rate hike. Restrictions on immigration will also be a constraint on labour supply growth.

On currency

“America’s Brexit moment has sent stock markets reeling, but there’s a key difference - unlike the Pound in June, the Dollar has remained surprisingly steady," says David Lamb, head of dealing at FEXCO Corporate Payments.

“Knee-jerk falls against other major currencies were soon reversed, and against both the Euro and the Pound the Dollar is back to where it was when the polls opened.

“In part this is down to the Pound having lost its safe haven status. Right now, many see swapping Dollars for Sterling as jumping from the frying pan into the fire.

“But it’s more a case of stoicism among dollarwatchers – who are so far gripped by paralysis rather than panic.

“The President Elect’s moderate victory speech has settled nerves to a degree, and there is at least consensus on one thing – America is taking a leap into the unknown and the potential for Dollar volatility beckons.”

On investing

“In the short-term risk-assets like shares, energy and industrial commodities will be hit hardest while investors seek shelter where they can find it in government bonds and precious metals," suggests Tom Stevenson, investment director for Personal Investing at Fidelity International.

"At times like these, a balanced portfolio will provide some protection but it is unlikely to prevent some painful losses in the short term.

“The most immediate impact of the election result in policy terms may well be a postponement of the expected interest rate hike next month. The Federal Reserve is certain to tread extremely warily if market turbulence persists. While investors will inevitably find it hard to keep their eyes on their long-term financial goals as markets react it is essential for them to do so.

“The reality is that stock markets are influenced by economic growth, innovation and the growth in corporate profits over time. Irrespective of who sits in the White House, people continue to go to work, businesses continue to pursue profits. The world goes on. We should not underestimate the seismic shock that America has delivered to the global economy but history suggests that big market events in time look like blips in a long-term upward progression.

"Look at a 30 year chart of the stock market and the 1987 crash is barely noticeable. That will come as cold comfort if the initial market reaction turns into something worse. But it is important to bear in mind as we assess what to do with our investment portfolios.”

On sectors

“Mining companies are winners on the Footsie so far, in particular Fresnillo," notes Laith Khalaf, Senior Analyst at Hargreaves Lansdown. "Shares in the precious metal miner have risen by almost 10 per cent. That’s because the price of its products, gold and silver, have risen, while the costs of its mining operations in Mexico, have fallen thanks to the drop in the peso. Pharmaceutical companies have also seen their share prices rise, as Clinton’s attacks on drug pricing are now no longer in the ring.

On (UK) property:

"Even though Trump's early words of reconciliation are encouraging we are likely to see a further period of uncertainty because he will not be able to take any decisive action until he assumes power in mid-January," says former Rics Residential chairman and estate agent Jeremy Leaf. "That is a concern - a further period of limbo until action is taken and in that time markets are likely to remain in uncertain territory.

'The knock-on effect on sterling and the FTSE inevitably has an impact on confidence here at a time when we’re already nervously anticipating the fall-out from Brexit. At the very least it looks like we will have fewer transactions, tighter lending criteria, less housebuilding and higher rents – which is exactly the opposite of what we’re looking for at the moment.'