The FTSE 100 endured its worst week since January, driven by fears of a Donald Trump victory and the strengthening pound.
With the narrowing poll lead for Hillary Clinton, investors are concerned that a Trump win could lead to major uncertainty and affect global trade.
The negative sentiment saw the FTSE 100 close 97 points down at 6693 and 303 points, or 4.3%, down from its closing position last Friday. Markets across the world also slumped.
So what impact would a Trump win have on the markets and hence investors? The Brexit shock vote may provide a clue. This led to steep immediate falls but the markets quickly recovered and in fact reached record highs last month. This means investors could have a short-term buying opportunity for US stocks.
However, markets have probably factored in the possibility of a Trump victory so falls may be less severe than at Brexit time. Against that, ‘Permabears’ believe that after well over seven years of growth and record highs, this could be the moment for a market correction.
It should be borne in mind though that the new President will not actually take up office until January 2017, so a bit like with the Article 50 situation, there will be an ‘interregnum’ period, albeit a shorter one. Another mitigating factor is that the US constitution and its system of divided government means no President can implement his or her ideas unfettered, thus reducing the impact of any perceived more radical ideas emanating from the White House.
From an investor’s viewpoint, the reality is that there will be a lot of market noise around the election and probably some short-term volatility. However, political elections and events rarely have a major long term effect on the markets. The Scottish Referendum, China’s slowdown, Grexit, Brexit - all saw periods of uncertainty and volatility but the markets bounced back.
As an investor, planning for the long-term, you should already have a well-diversified portfolio, so sticking to your financial strategy, ignoring the current market noise and riding out any storms is probably the best way forward in most cases – whilst being mindful of any buying opportunities that may arise through market volatility.
For further information on this or to help with your investment planning, contact Kellands.