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Thinking about Trump and Brexit? Here’s my investing cheat sheet for an uncertain world

As if 2020 hadn’t thrown enough curve balls in the direction of investors, we still have some key events to navigate over the next few months. One of the main skills that separates good investors from great ones is the ability to perceive what’s about to happen. It’s not an exact science, of course, and it starts quite simply by looking ahead and seeing what’s in the diary. From there, you can make your own calls on how you think events will play out. For some guidance, I’ve shares my own investing cheat sheet below.

June-December 2020

So what do we have on the horizon? I’d bucket the largest two planned events as Brexit here in the UK and Donald Trump’s bid to retain the Presidency in the US. Let’s take Brexit first.

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It’s been confirmed that the UK has ruled out asking for an extension package. This means the transition period will finish at the end of the year. The stock market paid little attention to this headline. But certainly the market will play much closer attention to ensuing negotiations, particularly as we head into the last quarter. Jitters and volatility are likely to be seen as investors worry that the deadline may be met without any deal. Whether no-deal would be a good thing in the long term is a subject for a different time and place, but uncertainty is always a problem for investors.

November 3 is marked as election day in the US. Given that the US stock markets actually took Donald Trump’s election victory last time as a net positive for the medium term, a continuation of the same may not be taken badly. Ultimately, as I said, the markets hate uncertainty. Investors would prefer that whatever the outcome, it’s priced-in long before the results. Is this relevant for UK investors? Absolutely. Global stock markets are extremely correlated, and so any move will likely be felt on the FTSE 100 as well.

My investing cheat sheet

So here’s how I’m gearing up for it all. The near-term Brexit risk is minimal, with most of the risk of a market tumble skewed towards the end of the year. The boost to the market that a deal would bring in the meantime could be large. Therefore, I’m staying invested in UK-focused stocks. I’d happily look to add more domestically-focused firms in the short term. Should we get to November without a deal, at that point I’d consider re-balancing the stocks I hold to protect myself from a worst-case scenario.

For the US elections, I’m not buying specifically for that right now. If Donald Trump appears to be pulling away in the polls, I’d consider buying stocks that do a lot of business with the US and stand to benefit from a Trump-Johnson trade deal. If the polls look too close to call, I’d consider protecting my portfolio. One way would be by buying a gold ETF, which should rally if we see a shock or concern. At present there is no consensus view on how the markets would react to a Joe Biden victory, so I have no conviction right now.

The bottom line is that planning for these events now is only a good thing. You won’t lose out from thinking two steps ahead!

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Jonathan Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.