Post US election, Dow Jones comes up trumps but volatility ahead?

The Dow Jones ended the week at a record high after the shock Trump victory.

Having closed at its record high level of 18807 on Thursday, up 1.17%, the index rose again by 0.21% on Friday to finish the week at 18847. This perhaps reflected the fact that at least there was now some certainty and also that Trump seemed to be adopting a more conciliatory tone in his early remarks.

In contrast, however, European shares fell back from their early gains, perhaps concerned about the possible longer term impact on global growth should Trump pursue his protectionist policies and also because of uncertainty as to whether his tough talk pre-election would now translate into action now that he is in power.

Having gained 1% on Wednesday immediately after the result, the FTSE 100 fell 1.2% to 6827.98 on Thursday, and then by a further 1.43% to 6730 on Friday.

So what now for investors? The likelihood is that there will be some volatility over the weeks ahead as uncertainty persists and as investors look to assess the potential impact of a Trump presidency on different stocks, sectors and regions, as well as the global economy as a whole. For example, Trump’s commitment to increase spending on defence and infrastructure saw defence, construction and commodity stocks rise, whilst talk of looser regulation saw the banks do well.

The reality for investors is that, as always, the key to long term investment success is time in the market, not timing the market. Investing is a long term game and as stated in the previous article, whilst political events such as the Scottish Referendum, China’s slowdown, Grexit, Brexit – and now the US election – lead to periods of uncertainty and volatility, the markets tend to bounce back.

Because of this, investors should avoid knee-jerk reactions. They should be looking to stick to their long-term plans, whilst treating any major dips in the market as a buying opportunity. At the same time, be prepared for some volatility ahead, as markets wait for details of Trump’s policies to emerge. As he does not actually take up power until January 2017, this could take a little while.

To discuss what Trump’s victory means for your investment portfolio, contact Kellands.

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