Now that the election is over, stocks are up despite many experts’ predictions of market havoc. Traders were misled by the polls, which stated that Hillary Clinton would have an easy victory; however, this was clearly not the case.
The people causing the market pullback before the election are not true investors; they’re traders that are only concerned with the short term and couldn’t care less about the long-term fundamentals of individual businesses or the economy.
Donald Trump defied the odds by becoming the president of the United States, and some analysts believe the markets could correct. Could Trump actually cause a market crash worse than the financial crisis?
I don’t believe this will happen. I actually think Trump will give the economy a boost. As he said in his victory speech, he wants to improve the economy and bring GDP to 4%. He also stated he would be cutting taxes for working people and corporations and will create thousands of jobs through infrastructure investment.
If you sold after the Trump victory, then you would have missed out on a very nice relief rally, which was not expected by investors. The only reason stocks will go down in the next few weeks or months is because Trump brings huge unknowns.
The U.S. Federal Reserve chairman Janet Yellen will probably not hike interest rates this year, as she originally planned, because of the uncertainty brought on by Trump. This announcement will come next month, and markets will start rallying because the market will no longer be fighting the Fed for the remainder of the year. The probability of Yellen holding off until Spring of next year has gone from unlikely to almost certain, and this is great for markets.
The U.S. economy is still strong, and the fundamentals are still there. As we head into 2017, we will see price-to-earnings multiples decline as earnings overwhelm the prices of stocks. Capital Economics, an investment firm based out of the U.K., stated, “A Trump presidency would presumably mean monetary policy staying looser for longer, which would be positive for the stock market.”
There’s no question that the reason for volatility is because of the uncertainty of having Donald Trump as the president. Uncertainty leads to volatility. As we start to get answers from Donald Trump, we may see the markets rebound and rally to new highs, as when the Brexit happened.
If you’re a long-term investor in times of tremendous market volatility, it is time to be disciplined and look at the big picture. Do not make any major moves if your investment plan is already set, as it could hurt your long-term returns. Stay the course and keep a long-term focus in mind, even though it can be hard with all the short-term volatility we’re facing.
One stock Canadian investors should own while Trump plans to accelerate U.S. growth would be Alimentation Couche Tard Inc. (TSX:ATD.B), which is a fantastic convenience store business with a huge growth-by-acquisition strategy and gigantic exposure to the U.S. with its Circle K branded stores. As the U.S. economy continues to grow, Couche Tard will be a beneficiary, as a huge chunk of its revenues is in U.S. dollars.
Many analysts were wrong about what would happen to the markets after a Trump presidency, and I believe contrarians will win. If you’re bullish on Trump’s plan, then now is the time to buy, as 2017 may see stocks rally by as much as 12-15%. Don’t miss it!
