US Presidential Election Investment Updates

Here we are, with the third Black Swan event of the year, with the unexpected victory of Donald Trump who is elected as the President of United States. The financial markets swooned at the initial reaction with the US futures and Tokyo Nikkei falling 5% at one moment in time, believing that Trump's protectionist policies will hurt the US and global economies. However, the market rebounded strongly believing that Trump's policy to rebuild the infrastructure in US will spur the sorely lacking fiscal spending and inflation which has been absent during Obama's tenure.

In short, the market can't quite decide if a Donald Trump presidency is good or bad.

I have mentioned in my last newsletter that it does not matter who becomes the POTUS at the end of the day, but the real concern is the path of the US Federal actions on interest rates as the current stock market rally is based on a horde of cheap money. There is a lot of speculation that with a Trump Presidency, the US Fed will not raise interest rates because the stock market will go to hell if he gets elected and the Fed will not want to risk a financial market crash by rising interest rates when that happen.

Since the stock market has not crashed and seems to be cruising along fine, the Fed is seen to be on the path to raise interest rates. Given the argument that Trump will spur fiscal spending which will lead to inflation, interest rates may rise even faster as compared to a Hilary presidency.

The portfolio has done well with the strong exposure to USD and US stock market. The USD has shot up to 1.398 to SGD as inflation concern rises. A sharp rise in USD and interest rates also give rise to a higher risk in the emerging markets which may lead to a potential capital flight.

I will continue to observe the market for a few days to see where it will decide to move. Meanwhile, I will be performing a switch in the next few days to move into a resource (metals & energy) fund. The key reason is due to the good valuation after 5 years of beating from a slowing China and India market and a market bottom has been reached.

In the case of a stock market crash in US or emerging market, the commodity market should be minimally affected due to it's attractive valuation right now.

Feel free to drop me a beep if you have any further questions!