I promised that I would not write another piece on Brexit in this column as frankly it was getting a little boring. Along came Donald Trump to help me out.
Like any dramatic change, it was always going to create uncertainty and short-term volatility in worldwide markets. An immediate move to quality, gold, bonds etc, was predictable due to uncertainty rather than any specific fears – does this remind you of any recent UK events?
The much more important matters, such as trade relations and fiscal policy, will only become clear in the fullness of time.
Trump represented a fundamental “change”, a push back against the status quo and the establishment (does this remind you of any recent UK events?). Despite the rhetoric, it is important to remember that the checks and balances of the US political system, not to mention the divisions now evident within the Republican party, will limit the new president’s freedom of action.
In recent years, Obama’s impact was limited because the Democrats had control of neither Congress or the Senate. The Republicans will continue to have control of both so, in any other circumstances, there would be little to stop the Republicans from enacting their chosen policies without much difficulty.
But the policies of the party and the President elect are far from aligned.
For example, those concerned by Trump’s stance on protectionism should be reassured that even a Congress controlled by the Republican Party, which has always favoured free trade, is unlikely to simply rubber-stamp any extreme protectionist policies.
In the meantime, it is important that investors sit tight and remember that such short-term fluctuations are an inevitable feature of markets, and do not alter the fundamental need for individuals to save and invest for their future. Events like this also remind investors of the importance of portfolio theory and the advantages of holding a broad range in investments.
There are plenty of commentators who are telling us the new world will fall apart and what will go wrong. I prefer to concentrate on opportunity. As someone one said to me, an optimist and a pessimist are wrong equally often, but the optimist has a lot more fun.
Looking forward, the uncertainty created by the result is likely to cause the Federal Reserve to be more cautious in its desire to raise interest rates, which should be good for equity markets exposed to the US. Furthermore, the loss of value of the dollar, if sustained, would also act as a cushion.
The, in my view, unnecessary 10-week delay until Trump actually takes office may at least provide a further chance for everyone to get used to the new reality and for initial fears to moderate.
We must remind ourselves that Trump built a hugely successful property empire and cannot be completely stupid. At times, perhaps, he opens his mouth before he engages his brain but it is widely accepted that, in business at least, he has surrounded himself with good people.
Trump inherits a growing US economy that has recovered well from the financial crisis, is enjoying rising corporate earnings and is fundamentally strong. This should comfort long-term investors in a market seeing the re-emergence of inflation.
The Americans had a dreadfully poor quality election debate, an unexpected result, some panic by commentators and yet the markets didn’t react half as badly as commentators expected. Opportunities for profitable investment arise. Trump was right when he said this was “our Brexit”. And if everything happens in threes, what price Jeremy Corbyn for PM?