Sunday, November 6, 2016

Great Expectations

In recent times, there has not been a political event that has a profound effect on the financial markets than the upcoming United States presidential elections. According to the polls, the two major candidates are almost neck and neck, and there is extensive media coverage on the social, political and economical consequences should either one becomes President.

On the investment front, there are countless articles and opinions in the news and on the internet about what to expect when a particular candidate wins, and a victory for different candidates spelt a different outcome for the financial markets.

So with the polls showing a close fight, and the markets could go either way depending on the election results, what do you as an investor expect?

In fact, no one knows what to expect.

Back in June 2016, the results of the United Kingdom’s EU referendum (or the Brexit referendum) shocked the markets, even though the majority of the polls during the run-up to the event favoured a “remain” outcome, albeit by a narrow lead.1 One of the main reasons was that the markets had expected, or “priced in”, a “remain” result2, so when it went the other way, a massive sellout ensued.

Perhaps the markets and the participants are remembering the Brexit experience, hence the current mood of uncertainty?

So how then for The Bedokian Portfolio investor?

If you are a passive investor, just stay the course and ride the waves.

If you are an active one, get ready your watchlist.3

May the best candidate win.

1 – Financial Times. Brexit Poll Tracker. (accessed 5 Nov 2016)

2 – Chu, Ben. EU Referendum: Financial markets position themselves for Remain victory. Independent. 23 June 2016. (accessed 5 Nov 2016)

3 – The Bedokian Portfolio, p 94-95

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