Five tips for retail investors in the wake of Trump's victory

PHOTO: Reuters

1. BE READY FOR MORE UNCERTAINTY

Pacific Investment Management Company (Pimco) said it has been encouraging investors to consider a more defensive posture.

"We still think the defensive approach is appropriate because of the likelihood of rising uncertainty and volatility, which will create risks but opportunities as well," it said.

The uncertainty in the next 12 months will stem not just from the outcome of the US election, but also from developments in Europe where key elections will be held in France and Germany, noted Mr Vasu Menon of OCBC Bank.

The US election could further spur the populist movements in these countries as well and cause election upsets. Uncertainty over policy at the US Federal Reserve and in China are other factors which could cause volatility ahead.

Thousands of anti-Trump protests take to streets in US

  • Demonstrators marched in cities across the United States on Wednesday to protest against Republican Donald Trump's surprise presidential election win, blasting his controversial campaign rhetoric about immigrants, Muslims and other groups.
  • In New York, thousands of protesters filled streets in midtown Manhattan as they made their way to Trump Tower, Trump's gilded home on Fifth Avenue.
  • Hundreds of others gathered at a Manhattan park and shouted "Not my president".
  • A demonstration of about 6,000 people blocked traffic in Oakland, California, police said.
  • Protesters threw objects at police in riot gear, burned trash in the middle of an intersection, set off fireworks and smashed store front windows.
  • Police responded by throwing chemical irritants at the protesters, according to a Reuters witness.
  • In downtown Chicago, an estimated 1,800 people gathered outside the Trump International Hotel and Tower, chanting phrases like "No Trump! No KKK! No racist USA."
  • Chicago police closed roads in the area, impeding the demonstrators' path.
  • There were no immediate reports of arrests or violence there.
  • "I'm just really terrified about what is happening in this country," said 22-year-old Adriana Rizzo in Chicago, who was holding a sign that read: "Enjoy your rights while you can."
  • In Seattle, police responded to a shooting with multiple victims near the scene of anti-Trump protests. Police said it was unrelated to the demonstrations.
  • Protesters railed against Trump's campaign pledge to build a wall along the border with Mexico to keep immigrants from entering the United States illegally.
  • Hundreds also gathered in Philadelphia, Boston and Portland, Oregon, on Wednesday evening, and organisers planned rallies in San Francisco, Los Angeles and Oakland, California.
  • A representative of the Trump campaign did not respond immediately to requests for comment on the protests.
  • Demonstrators face off with police as they take over the Hollywood 101 Freeway in in Los Angeles.
  • Antoinette Gaggero holds a Trump figurine making a Hitler salute that she found during an anti-Trump protest in Oakland, California.
  • Demonstrators riot in Oakland.
  • Police arrest a demonstrator in Oakland.
  • An officer examines a vandalized police vehicle as demonstrators riot in Oakland.
  • A man tries to remove graffiti as demonstrators riot in Oakland.
  • Patrons hold a sign as people march by in downtown Los Angeles.
  • A demonstrator holds a sign during a protest in San Francisco.
  • Patrons cheer as people march by in downtown Los Angeles.
  • A Donald Trump pinata is burned by people protesting the election of Republican Donald Trump as the president of the United States in downtown Los Angeles.
  • People march in downtown Los Angeles.
  • People protest outside Trump Tower in Manhattan.
  • Demonstrators protest outside the Chicago Theatre.
  • Demonstrators walk through Downtown San Diego.
  • A man gestures as he rides a hoverboard near a group of police officers on motorcycles during a demonstration in San Francisco.
  • People climb a pole outside Trump Tower during protests in Manhattan.

2. STAY DIVERSIFIED

Financial experts point to the importance of portfolio diversification, particularly during such uncertain times.

One way for investors to deal with the uncertainty and volatility is to stay diversified across various asset classes and over time through dollar cost averaging, said Mr Menon.

"Sharp pullbacks in the markets could offer buying opportunities should valuations become more compelling. However, investors must be prepared to stomach the accompanying market swings should they wish to do so and be ready to take a medium-term view with their investments," he advised.

He suggested that a good way to seek exposure is through a diversified portfolio of equities and/or bonds.

3. SPOT OPPORTUNITIES

Standard Life Investments advised that this environment is likely to create opportunities for "bottom-up" stock-picking in both equity and bond markets.

"Even in a benign trade policy scenario, firms with extensive global value chains, or reliant on migrant labour, would face a more uncertain future, while firms facing less onerous regulatory requirements stand to benefit. If the new Trump administration pursues an aggressive unwinding of policies that have supported globalisation, an extended period of weakness for risk assets is likely," it said.

Mr Mark Burgess, head of equities at Columbia Threadneedle Investments, wrote in a note that obvious winners in the US domestic economy are infrastructure, with a focus on roads, bridges, airports and sectors that would benefit from mergers and acquisitions, and industry consolidation, about which President-elect Donald Trump is particularly enthusiastic.

Things Singapore investors need to know after Trump's win

  • Donald Trump (shockingly) won the US election. As far the financial markets are concerned, here are eight things that all Singapore investors should know about.
  • 1. Gold price is going up: Trump's victory has already seen a flight towards gold, as investors seek safe haven for their money.
  • 2. Uncertainty will cause sell-off, stock markets will drop: Investors, both institutional and retail, hate uncertainty, and that uncertainty is going to cause sell-off, leading to price drop across global equity markets.
  • 3. Panic leads to opportunity?: Remember the famous Warren Buffet quote, "be fearful when others are greedy, and greedy when others are fearful"? Well, you can now put this to the test.
  • 4. Watch the US Dollar close: While the popular sentiment is that the USD is going to depreciate as a result of Trump's victory in the short-run, the long-term performance of the USD is very much subjective still.
  • 5. Look out for local companies that deal heavily in US contracts: The uncertain future of the USD will be one to keep watch on, particularly for investors who own local stocks that have their contracts in USD.
  • 6. Bonds to be in demand again: With investors fearing that Trump's election will bring global uncertainty, prices of treasury bonds across the globe has seen a spike in price.
  • 7. High quality dividend stocks might be in play: There are many good local blue-chip companies that have been through recessions after recessions. They still continue to do well till today. Stick to them.
  • 8. Avoid panicking: The stock market is full of ups and downs, as it fluctuates largely based on human emotions.
  • We have already seen a shocking poll result earlier this year when the UK voted to exit the EU. As expected, markets sell-off were immediate. But life still have to go on. We still have to invest for our future and our retirement.

Financials and the defence sectors are likely to thrive while other sectors likely to do well include consumer staples, telecoms, energy and mining.

Mr Menon said that sharp pullbacks could provide buying opportunities for those with a strong risk appetite and medium-term horizon. In terms of regional allocation, Asia ex-Japan could be attractive on a relative basis, given the region's cheaper valuations and improving macro fundamentals.

"Valuations for Asian equities are not high, and in the medium term, the region should grow at a faster rate than its developed market peers," he said.

ABN Amro Bank said that once volatility subsides, equity markets could represent an opportunity for clients who are underexposed to stocks.

"The sectors that we are most positive towards are information technology and healthcare, where medium-term innovation and demographic trends remain supportive. The recent correction in healthcare stocks has also made them more attractive," it said.

4. WATCH FOR SIGNS

With the present lack of clarity on Mr Trump's policies, it would be prudent to look out for certain signs. Market observers say one key sign is what the 45th US President will actually do versus what he has said.

Standard Life Investments emphasised the importance of not overreacting, and waiting for clear announcements of Mr Trump's priorities and agenda.

Mr Daryl Liew at Reyl Singapore said: "There is a lot of uncertainty in the markets currently because investors are guessing Mr Trump's policies, but expect more clarity in the next few months leading up to inauguration when we find out who Mr Trump lines up as his economic advisers."

5. BACK TO BASICS

Mr Ian Martin, chief executive of HSBC Insurance (Singapore), said this is a timely reminder for everyone to have a comprehensive financial plan that includes protection and is supported by a disciplined savings habit.

When you have a long-term well-diversified wealth management plan in place - one that is able to withstand short-term shocks - you can sleep soundly at night.


This article was first published on Nov 13, 2016.
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