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A Trump presidency

Donald Trump has been elected the 45th President of the United States. At the time of writing 46 of the 50 states had declared results but Trump had surpassed the 270 mark for the Electoral College votes required to win.

Market impact

Across the globe there has been a sell-off of risky assets, but markets have generally rallied from their initial lows. Futures on S&P500 went down 5.7% when Trump’s victory became almost certain, and now has recovered to be down 1.8%. Global investors have been selling equities, as many traders had priced in the likelihood of a Clinton victory. Indices in the UK, France and Germany have all suffered drops so far, but these have already started to show signs of recovery. Asian markets also suffered, but losses narrowed as the trading day drew to a close.

The US Dollar has also suffered, overnight the dollar was down 1.6% against sterling, it is now almost flat against yesterday’s closing. There are jitters throughout the currency markets. But whilst some analysts are likening this result to the vote for Brexit in June, neither markets or currencies are reacting as wildly as they did on 24 June.

Investors are seeking out safe haven assets. Gold is currently up 2.2%, at 5am it was up by 4.7%. The Yen and some sovereign bonds have also rallied since the election result started to become clear.

An unexpected outcome

Analysts across the globe were expecting a tight result, but had not anticipated this outcome. Of the eight battleground states, Trump has won five, with two still to announce. The national popular vote shows just how close the election was as Trump held a 47.7% victory over Clinton’s 47.5%. The republicans also hold a majority in both the House of Representatives and the Senate.

A nervous market

A Trump presidency is somewhat of an unknown, this uncertainty helps to explain the sell-off of more risky assets. So far Trump has made it clear that he will be investing in infrastructure which could boost US growth in the medium term.

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History shows us that political shifts have a limited impact on financial markets over time. It can be unsettling to see sudden moves in the financial markets, but this is a response to uncertainty. Markets have already started to show signs of calming and we don’t seem to be facing a 24 June scenario.

MoneyFarm portfolios

All MoneyFarm portfolios are well positioned to manage any volatility that may occur following the election result. Our approach of building globally diversified portfolios is designed to weather periods of volatility and specific events. Maintaining a long-term view on markets helps to encourage portfolio growth over time.

With clarity on the result comes a smooth transition of power, this reduces some of the immediate uncertainty in the market. Over the coming weeks and months, we will look out for signs of softening rhetoric and a move towards the centre, as the President-elect looks to rebuild bridges within his own party.

Our investment team will be closely monitoring the situation to decide whether any tactical moves are required, either positive or negative, to adjust our portfolios ahead of the handover of government that takes place in January.

Our Investment Consultants are on hand should you have any questions. Please give them a call on 020 3745 6990.

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