What’s happening in America? Are they about to have their own ‘Brexit’ moment?

Financial Advisory

Financial Advisory

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Sponsor:  Wayne Ellis - Tilney for Intermediaries

Moderator:  Ghilaine Chan - Ghilaine & Co

Economics and Politics all wrapped into one is not a good combination.  Who is the expert on this? It is an unknown quantity.

  • It seems that outliers across world politics have found their voice. Strange economics always creates strange politics, look at Hitler.
  • The demographic that Trump appeals to is misunderstood by the cosmopolitan demographics across the country (and by extension, the world)
  • The Media in the US doesn’t have a ‘news at ten’ national news. They are focussed locally, so what we hear in the UK, that is shocking, resonates with the local population that it has been designed for. The rest of America doesn’t see it unless their own local media chooses to show it.
  • People vote for their own self-interest, whether rational or not.
  • With the Republican Party as it is, they are trying to get votes on the coattails of Trump which may allow Democrats to sweep the board.
  • Even the ballot paper promotes block voting by Party rather than by individual person. 

The effect of Economic outcomes 

  • Do you have a diversified portfolio? Probably not, all diverse funds are seen to invest in the same ‘diverse’ way. 

With regards to Trump and his economic policy, will what he says now be policy or what he says tomorrow? If he lets the debt run, the dollar will weaken, therefore you need to be able to act quickly.

  • Trump will likely act quickly to resolve so you would have a short window to do anything.
  • Clinton will likely see more strength in the dollar.
  • Quick turnaround in GDP if she spends what she wants.
  • Their economy is going in the opposite direction to the world.
  • Do they want to strengthen the dollar?
  • Problems with the rest of the world.
  • If GDP rises it will create a strong dollar, how do they control it? If the debt runs, it will create a weak dollar. Trading partners are weakening their currencies so there is a mismatch between what politicians want to and what economies allow.
  • A shock could be positive for the markets. A recession could hit from a strong dollar. America is relatively self-sufficient, economically, they could cut themselves off, but geopolitically, historically, foreign trade is a way of reducing war.          

Prepare as you did for Brexit

  • Have a portfolio that hurts as little as possible if it goes either way
  • Short term opportunity on a coin flip, you should act quickly on that 50/50 bet.
  • Probably in 3 years it will be the same whoever gets into power
  • Don’t fool yourself that you have more diversity in your portfolio than there is
  • If we think he will make random or boredom led decisions, it could create a vicious cycle of Civil unrest which increases capital to the few.

  


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