How Will Markets React to the US Election?

As the US Election race finally comes to an end next week (we hope), financial journalists are rolling out the most expected of headlines. I’ve just typed “what happens to markets if Trump wins” into Google and sat here laughing for the last half hour. The importance of who becomes the next US President is no laughing matter. But hearing predictions that range from global meltdown to business as usual to market rally just cracks me up.

The more I read the more I realise, no one really knows what the impact might be. At a guess, I would say the most popular view is a Clinton win would be positive for markets. A Trump win, on the other hand, would see an immediate fall to be followed at some point in the future by a rally. (Disclaimer: I make this claim of the most “popular” view after only 30 minutes of googling and scanning articles).

So what to do then to prepare your portfolio? NOTHING. Guessing what might happen, guessing how markets will react, guessing when markets will change direction IS NOT A STRATEGY for investors.

If you are crazy enough to try and position your portfolio for potential outcomes here are a few articles to confuse the hell out of you:

If Trump is elected president, it would be ‘exceedingly harmful’ to markets – CNBC

‘Black Swan’ author Nassim Taleb says don’t worry about a Trump presidency – CNBC

US election: Neither Clinton nor Trump better for markets according to US financial advisers – ABC

And a few quotable quotes:

A Trump presidency would “likely cause the stock market to crash and plunge the world into recession.” Simon Johnson, MIT economist

“Trump will create a colossal panic, but the relief rally will be outstanding.” Lawrence G. McDonald, ACG Analytics

“The president’s policy choices have been pretty irrelevant to financial market performance.” Chris Wallis, CEO and portfolio manager, Vaughan Nelson Investment Management

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