The day that was supposed to settle so many outstanding questions and anxieties about the future has arrived, and with it only more uncertainty. On this morning after Election Day, no one really knows what a Trump presidency will mean for the country, the economy or the financial markets. How will he govern? Can he handle the responsibilities of leadership on the global stage? Will he follow through on the promises he made throughout the campaign?
For many people associated with the financial markets, these questions only raise doubts about the future. If he is able to follow through on his proposals to cut taxes and increase government spending, the federal budget deficit is expected to grow. Redrawing trade agreements toward more protectionist policies will fall harder on the largest U.S. corporations who do much of their business beyond the national borders. This will of course weigh on stock values.
Prior to the election, a Trump presidency was projected to be good for gold. That may be a likely outcome, given all of the uncertainty that will accompany his arrival in the White House. As the leader of the worlds largest economy and greatest military force, Trump may challenge the long-established order of global alliances and cooperation among countries. But how much this order will actually change is clearly unknown at this point.
The immediate reaction in the global financial markets was shockin early Wednesday morning trading across Asian markets, equity market futures had plummeted and gold prices moved higher as the election results were announced. For many market analysts, it seems like Brexit all over again. That event may provide a good parallel for investorsmarkets will experience a snap reaction as investors absorb the news and re-align their expectations about the future, but eventually may revert to pre-election levels once emotion is washed out of the market.
There is a perception that geopolitical risks may escalate under a Trump presidency. These pervasive doubts and risks will work to keep investor anxieties high, which naturally benefits safe haven asset classes such as gold.
As we have stated many times over the past year, it is time to look at your overall portfolio and make sure that you have the right allocation of gold in order to protect your wealth during times of uncertainty.