Trumpageddon, or just more theatrics in US politics?

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Well, it happened…

It is fair to say that most of the world is in a state of disbelief today. It would be comical if Donald Trump’s victory wasn’t such a surprising indictment of the state of US politics.

24 hours ago it was expected that the Republicans would be in disarray following the election, but today the Grand Old Party is in the strongest position a party has been in since the Democrats last had control of the Senate (2009-2011), with far more power to effect political change than Obama has had in recent years. This means for at least the next two years (when control of the Senate will be voted upon again), Republican policies are likely to dominate.

Trump can’t be compared to any president in history. Some commentators will compare him to Ronald Reagan, and we can only hope that this presidency follows that format of government, with Trump simply a figurehead, well advised by capable, experienced, politicians. Trump has no experience in office, and if the last few months are representative, he is far more likely to upset the status quo than anyone preceding him. What can we expect other than more of the unexpected?

The implications for global markets and investing

Asian markets took the brunt of the news, with the Nikkei index falling 5.36%, but so far the markets in Europe have reacted with relative indifference. The FTSE 100 was down only 0.75% at midday and sterling has strengthened against the US dollar by only 0.5%. US equity markets are likely to take the news more seriously. However, it is fair to say that, in general, there are very few conclusions that can be drawn: no one knows what the future now holds. Uncertainty is usually bad for markets, but perhaps in this case one uncertainty (the result of the US election) has been removed and replaced by another, and perhaps the alternative, Hillary Clinton, was not significantly more palatable.

As ever in global markets, politicians can only ever hope to move the needle ever so slightly. Market forces are far stronger than government actions, and well managed companies will always optimise the hand they are dealt. No one should underestimate the challenge that this presidency brings to global politics (specifically in terms of US foreign policy) and US trade, the impact on companies and markets is not knowable at this point in time, and could on balance be positive or negative.

Some stocks will benefit from the unexpected Republican win. For example, gun maker Smith & Wesson will certainly be feeling confident about future revenues, and US construction companies will be rubbing their hands at the concept of that huge wall…


As ever, our investment process means we focus far more on companies than on politics and macroeconomics. Specifically, we focus our equity investments on companies which are multi-national, which themselves are focused on finding areas of growth across the globe. These companies are termed ‘high quality’ which means strong balance sheets, low levels of leverage, and strong cash flow. Regardless of political change, the financial system will continue to reward companies that achieve growth and generate earnings consistently.