It’s been a week since we know that the next president of the US will be Donald Trump. Once thing I can promise: this is never gonna be a blog about politics. Also this post will be totally politically neutral. First of all it’s easy for me to be neutral as I live in Europe. Secondly everyone must respect the decision of the American people; at the end of the day the guy got almost as many votes from them as Hillary 🙂 But let’s stick to the topic of finance and let’s see what kind of conclusions we can make from this week!
The first and most important conclusion is that analysts know bullsh*t. Please feel free to tweet this quote! 🙂 (By the way hereby I use the opportunity to invite you to follow us via or brand new Twitter account. There should be a follow button at the upper right side of your screen, or just search for @Theroadto1m) Going back to the analyst forecasts, you might still remember what they have predicted. If no, let me quote some of them (at least the ones that are still available on the internet 🙂 ):
“If Clinton wins, you get a big relief rally. If Trump wins, then you get a big sell-off. I think that from where we are today, until the bottom of that sell-off, you are looking at a good 10 percent easily. I think whether it goes deeper than that depends on the temperament that Trump displays after the election,” – says one expert at CNBC.
“A big adverse surprise — like the election of Donald Trump in the U.S. — would likely cause the stock market to crash and plunge the world into recession.” – by Marketwatch
” A win for Donald Trump in next week’s election could take a big bite out U.S. stocks, according to the latest forecast from Citi. In a note to clients late Thursday, the bank said the S&P 500 will fall by 3% to 5% immediately if Trump is elected.” – from an article of CNN
“‘If Trump were to become president, gold prices will likely perform well, because we expect that his policies will be inward looking and will weaken the fundamentals of the U.S. economy.” – suggest Georgette Beole from ABN Amro, predicting a $1,850 gold price in this article.
“A Trump victory would make international investors less confident about the direction of American economic policy. This in turn might lead to the Fed being less willing to tighten rates in December, another reason for the dollar to weaken.” – via the The Economist
You might expect that the experts would have a good estimation on the consequences of Scenario A (Clinton) and Scenario B (Trump) when either of them will surely happen. In addition all the linked articles are from November. Now here we are, and after an initial few hours shock the stock markets are higher, gold is falling, chances of a FED rate increase is 90% and the dollar rallies.
If you share my mentality and you are a long term investor and not a trader, you did nothing during this whole election circus. On the long term such events are only a noise on the chart. Look what wars and natural disasters have caused to share prices and ask yourself the question: do you really want to jump in and out from the market based on analyst recommendations? I am saying this irrespective from the recent market reactions. If tomorrow the stock market would collapse, I would still stick to my plan and keep on saving and investing.
The second conclusion we might make from the first week after the elections is the reactions of the market in the various sectors. Are there better or worse places to put your future investments? Well, if you are a strict index investor, you don’t have too much headache, just keep on what you are doing. But if you like to play a bit like I do, here are the first reactions:
- Financials up – Due to the hope that the regulatory environment will be eased, plus the increased chance of a FED rate hike also helps
- Pharma up – Due to the hope that the promised more strict pricing policy won’t be realized by Trump
- Infrastructure up – Promised infrastructure investments. Look at Caterpillar. Does the wall project ring a bell? 🙂
- US bond yields up – According to some, it already reached a level to invest. I would personally wait; especially if you have a mortgage, you might be still better off paying some extra to it instead of buying US bonds.
- Green stocks down – Due to the fear that environmental incentives will be cut.
- Technology (especially companies with large cash reserves or manufacturing facilities abroad) down – Apple and the FANG shares are not really the winners so far
Bear in mind that this is only a summary of the reactions based on the first week which might indicate the start of a trend, but also can mean that if the hopes driving these buys are not realized, there might be bigger sell offs in those sectors.
I personally put some confidence in the US financial sector and started to purchase the Vanguard Financials ETF (VFH). This ETF has an attractive, 0.10% expense ratio plus also comes with a bit over 2% dividend yield. This is a new addition of my portfolio that I will disclose again by the end of this month as usual. Besides of this I am not planning any significant changes to it; I am sticking to the plan. At the end of the day I am not an analyst. 🙂 (And also not an adviser, therefore don’t take it as an investment advice!)
How do you see the first market reactions? Did you made any changes to your investment plan because of it? Please feel free to comment!
Please subscribe to the weekly newsletter and never miss a new post!
Disclaimer: This post or any other information on the site is not intended to be and does not constitute financial advice or any other advice. I am solely sharing my idea, plan and progress on early retirement.