The possible election of Donald Trump could have a significant impact on markets.
While we have long argued that politics has little impact on markets and investments, we believe both the Brexit issue (see article [here]) and the possible election of Donald Trump as two potential events that could have significant impacts on markets.
Should Donald Trump gain the US presidency in 2016, then we would expect markets to show significant volatility and we would view this as a negative time to hold US investments. Trump’s economic policies are confusing and conflicting at best, dangerous at worst.
While a Trump presidency is possible, we do not think it likely. If this situation changes in the coming months, then we will likely re-assess our investment advice to you.
Our 2016 predictions
We re-iterate what we wrote in late 2015 in our Investing Insights report for our 2016 controversial predictions:
“Hillary Clinton: The former Secretary of State will likely take centre stage in 2016 as Bernie Sanders campaign falters and she faces off against her Republican contender. We believe the November 2016 US election is hers to lose. Should she win the election, how well she manages the baton pass from outgoing President Obama will be crucial moving into 2017.
Clinton gains presidency, Democrats retake Congress in 2016 landslide
The rise of Donald Trump has confounded pundits on all side of politics in the USA. We liken it to an asset bubble – when you’re in the bubble it feels like it will go on forever. It’s not until the bubble pops that everyone wonders ‘What the hell were we thinking?’ Trump’s bubble will pop.
If Trump is not the Republican nominee he could run as an independent and split the Republican vote (much like Ross Perot in 1992 when Clinton defeated Bush). If Trump is the Republican nominee he will alienate much of the mainstream electorate and would likely lose in November. If we’re wrong and President Trump is elected, then God help us all.”
We highlight this editor’s note that appears at the bottom of EVERY article on the Huffington Post article that relates to Donald Trump.
“Editor’s note: Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S.”
We remind readers of our other Investing Insights 2016 controversial predictions:
Prime Minister Turnbull elected with a healthy majority
“We almost wrote ‘re-elected’ there until we remembered that PM Turnbull hasn’t actually been elected yet. While much can happen between now and the Federal election in 2016, we believe Turnbull’s centralist positions combined with the sense of relief that the Rudd-Gillard-Abbott era is finally over should see his Government comfortably re-elected.”
June 2016 comment: We continue to believe this is the likely election result.
Budget full of super surprises
“We expect the first Turnbull/Morrison Federal Budget in May to be a bold one. They will announce major changes to super that will likely impact many of our clients. We will communicate with you in advance of this time. Read more online here bit.ly/SuperChanges. “
June 2016 comment: This prediction eventuated and you can read more on our Budget 2016 Survival Guide.
Oil price rebounds in 2016
“The low oil price in 2015 has wreaked havoc on countries such as Saudi Arabia and Russia. So far they haven’t acted in concert to limit supply to stabilise prices but in 2016 it may be in their best interests to do so. If economic growth picks up in 2016 then this will also help oil demand.”
June 2016 comment: West Texas Intermediate (WTI) is up 36% in US dollar terms since the beginning of 2016.
El Niño back on the front pages
“We are not scientists but we do tend to listen to what they say and don’t buy the idea that they are somehow involved in a global conspiracy. We expect extreme weather patterns to once again hit the front pages of the newspapers as temperature records are once again re-written.”
June 2016 comment: Recent unusual storms on the East Coast of Australia have been particularly extreme.