As the US licks its wounds after one of the most divisive elections in history, the markets appear to anticipate a positive economic outcome.
On the election night, the overnight futures markets plummeted with the expectations of a Clinton victory. But it didn’t take long for a rebound. By morning, the markets returned back to normal.
Lower taxes and a less regulated environment are good for the economy. And I hope Trump pulls it off. However, I am worried that what we see now is just a post-election honeymoon.
Like most candidates, Donald Trump will not fulfill all of his promises. Hopefully, he will compromise on some divisive issues and won’t go to extremes. However, contrary to popular belief, the biggest issue is not Trump.
President Trump will do his best to reform government and stimulate business. But he will have to fulfill that in the face of major economic headwinds, some of which are outside his control.
Here are the five strongest ones.
President Trump will need to be very savvy if he is to lead a united America towards peace and prosperity.
Introducing reforms that curb the power of special interests in DC is a gargantuan task. Will Trump succeed? Only time will tell.
Like all Americans, I hope for a bright future. Hence I continue to invest in high-grade bonds and stocks. However, a period of high-volatility is inevitable. Think QE, negative interest rates, an overdue recession, levels of debt, you name it. Now add up the political risk that comes with a Trump-led administration.
I don’t doubt Trump’s desire to bring change was sincere and I hope he succeeds. But hope makes for a very bad investment strategy. Hence your portfolio should always be prepared for the worst.
Precious metals rarely do well in times of stability and prosperity. But during economic stress, they are the best natural refuge. Whether it’s high deflation or high inflation, gold almost always shines.
In the 1970s—a period of double-digit inflation—gold rose from $35/oz. to a peak of over $800. During the 2008 financial crisis, gold jumped from $760/oz. in November 2008 to $1,130/oz. at the end of 2009.
We all pay for insurance that we hope we never claim. Nobody wants to get money for a house fire, auto accident, or heaven forbid, the death of a loved one. Yet, we buy it.
With all of this in mind, I am increasing my own allocation to gold and precious metals from 10% to 15% of my portfolio. I suggest you do the same.