A New World Order?

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Below is an article from Frank Corrigan with his take on the impact of the recent Presidential Election.
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America has shown that it is not immune to reactionary politics in making their latest choice of President. Widespread disillusionment at the gulf between those who have done well out of the latest Banking Crisis and the vast majority has stoked the appetite for change in Britain, Germany and now in America too. The die seems to be cast for France, Spain and Italy as their Referenda and elections take place in the coming months.

For investors there will be the same knee-jerk reaction seen post-Brexit, with a sharp sell-off in Equity Markets and a weakening of the US Dollar. That shock will not last though because there are constraining measures to limit the ambitions of any President which have been in place since the first Independence Day.

Although there is likely to be a clean-sweep of Republicans from the Oval Office through to the Senate and House of Representatives, the views of the next President are not universally shared by his party. He will find progress frustratingly slow when compared against the outcomes he is accustomed to through the nimble team that helps him to run his business empire. With no experience of how the organs of government work there will be heavy reliance upon an extended chain of bureaucrats who, in a real-life parody of “Yes Minister”, will accelerate or hinder policies according to their collective, unwritten but very-long-term, agenda. In short, little will change in practice.

The common factors in each of these votes has been increasing isolationism and a desire for self-protection, neither of which might be considered positive factors for the UK as it seeks to renew its outward-looking business relationship with the rest of the world. Thankfully though the dead-hand of the civil service in each country will limit the progress that their political leaders can make towards these extreme policies. Business as usual beckons.

In America the stock-market was pushing towards the top end of its value-range in October and so the short-term sell-off represents an opportunity to buy the market. Much had been made in the campaign of the wish to redirect the US military budget back into America rather than protecting the rest of the world, on the basis that local problems should be resolved locally. Of all the countries that want to do business with America the UK is therefore in the best possible place, having played a full part in all the US fields of military battle.

Two months of negotiation now ensues as a new team is identified by Mr Trump to support him over the next four years. Their identity and credentials will be scrutinised closely by many, of course, but the growing military, computing and political confidence within Russia and China may take this signal as an opportunity to “grab territory” or renegotiate trade terms with weaker nations.

Interesting times such as these are best faced with a portfolio of investments that are actively managed and have the right asset allocation for you. The short-term turbulence that follows another unexpected political outcome is just a distraction in the long-term journey towards your goals, but please contact your adviser if you have specific concerns.

Frank Corrigan
November 2016