Trump's victory is effectively the American people's retribution against the political establishment the United States have maintained for so long and, with Trump's shock victory, came plenty of shocks to financial markets last week. At one point, the U.S. share market looked like it was going to crash but by close of day was higher than the morning. An investment strategy based on reactions to media headlines isn't going to assist long-term wealth creation during such volatile times.
The reaction in the market-place is reminiscent of the Brexit vote which saw the British people leave the European Union in late June of this year. While there are fundamental differences between the two, some parallels can be drawn such as a divisive campaign, an unexpected result and palpable fear for what the future holds. Like Brexit, however, it is nearly impossible to measure what the outcome will immediately mean for the country's citizens, let alone the economy and financial markets. What we can measure though are valuations in investment markets. Thankfully, we're not peering into crystal balls when it comes to predicting outcomes and implications of elections. Portfolios are driven by long-term, valuation-driven investing, which means financial advisers have data and information at their disposal to help with investment decisions.
At Forsyths, we are encouraging investors to look through the market noise and panic and remain focused on the bigger picture. While it may feel uncomfortable to read current headlines, the rollercoaster ride in financial markets is nothing new. As we are long term, valuation driven investors, with a focus on the preservation of capital, it is our belief, that under or overvalued markets will return to their fair value, or what they are really worth, over time.
Negative sentiment and heavy selling, often driven by fears of what might happen, have historically created the best opportunities for value investors. Unstable markets often present the perfect opportunity to purchase quality assets that are 'on sale' so, whilst a market tumble may appear unnerving, it can actually be a great time to maximize investment opportunities.
Craig Benham is Principal of Forsyths Financial Services and has held this role since 2006. Craig has tertiary qualifications in economics, applied finance and investment and financial planning. He is a Certified Financial Planner® (CFP) member of the Financial Planning Association of Australia and is an accredited SMSF Specialist Adviser (SSA) through the Superannuation Professionals Association of Australia. Craig has broad experience in financial services having worked in the industry since 1992 with leading financial institutions including AXA, Lend Lease, NAB and Macquarie Bank.