Donald Trump will be officially inaugurated as president of the United States later today, and no matter what you think of the billionaire and his policies, Trump’s presidency will most likely have a significant impact on your investments over the next four years.
Full of ideas
So far, Trump’s election has had a positive impact on equity markets around the world. It seems traders and analysts believe his pro-growth policies will bring the world out of the economic rut that it has been stuck in the since the financial crisis.
Trump’s rhetoric, along with buoyant stock markets, have also helped send business optimism to a multi-year high across the United States, which should be good news for the world’s largest economy.
However, even though markets may be optimistic about a future under Trump, until he takes office and executes some of his ideas, it’s all just talk. Indeed, markets have a habit of buying the rumour and selling the news, which means that even if Trump does take drastic action to revive economic growth during his first 100 days in office, markets could still fall.
The first 100 days
Investors and traders around the world will be closely watching Trump’s first 100 days in office. It’s this period that generally sets the tone for the rest of the presidency. Even though markets may prove volatile in the near term, if Trump introduces pro-growth policies during his first 100 days, throughout the rest of 2017 investors may return to the market with cautious optimism. On the other hand, if he proves to be as unwieldy and disruptive as some have predicted, there’s no telling how investors will react.
All in all, his inauguration will most likely mark a turning point for markets as his presidency gets under way. After months of buying by investors driven by Trump optimism, it’s possible the markets will sell off in the near term as investors ‘sell the news’. Then their direction for the rest of the year (and the rest of this presidency) will depend on his actions.
Look to the long term
Today’s inauguration may be a key point in time for markets for now, but for the long-term investor, there’s no reason to panic.
Even if Donald Trump turns out to be the nightmare some are predicting, his presidency will only last for four years, which isn’t that long in the grand scheme of things. If you invest with a 10- or 20-year horizon, Trump will be long gone by the time you come to draw down your portfolio in retirement.
The best way to invest without exposing yourself to any of his erratic trade policies is to go in via a low-cost index tracker fund or equity income fund. If funds aren’t for you, a portfolio of globally diversified blue chips that have a record of returning cash to shareholders and surviving in any economic environment should also work out well.
