An update from the Chair of the CARE Investment Committee – Emmanuel Calligeris
We hate to say we told you so…
GPS Wealth’s core investment belief is to invest for the long term. We also believe that one of the major inhibitions of investors to achieve their financial goals is their investment behaviour. Trying to time short term moves in investment markets for wealth creation may be futile with investors more likely to make the wrong move than the right one. The cornerstone of the CARE Investment Philosophy is a focus on the long term and the CARE investment portfolios were created with this in mind.
The US election result unexpectedly saw Mr Trump and his Republican Party win both the Senate and the US House. Financial markets sold off sharply on the result as they reasonably expected the Democrats would be victorious. Australian shares fell by 1.92% whilst Japan’s Nikkei fell 5.35% and the Dow Jones Industrial Average (overnight market) was limit down – circa 800 points or 5%. When the US share market closed the day after the election result it was 1.4% higher than the previous close or a 1056-point turnaround on the overnight market – catching investors off-guard. The Nikkei was almost 6% higher erasing all of the previous day’s fall
Mr Trump certainly ran an interesting campaign promising increased spending on infrastructure, lower taxes and outrageous claims with respect to his intentions for US policy on immigration, trade and geopolitics. However, he was magnanimous in victory. Investors gained confidence that spending will help boost the economy and also became optimistic that the Republican clean sweep of the White House and Congress is poised to end six years of legislative gridlock and enable Mr Trump to deliver his pro-business agenda on tax and regulation.
We are under no illusion that there still remains considerable uncertainty with respect to the policy intentions of the newly elected administration with respect to threats to ignite a trade war with China, impose a 35 per cent tariff on Mexican goods, to renegotiate the NAFTA trade deal with Mexico and Canada and to reject a pending Pacific Rim deal with 11 other countries including Australia, however we also understand that in the long term, companies will continue to invest to produce profits which should result in excellent investment returns.
The path is likely to be volatile but this is a natural part of investing. We continue to invest for the long term.