Today’s US election is probably the biggest and most uncertain election for many years. I haven’t touched my share portfolio ahead of this potentially seismic event, and I don’t expect to do so afterwards. Let me explain why.

Brexit on steroids?

Over the last few weeks, we’ve seen US stock markets rise and fall in line with Hillary Clinton’s polling numbers. Even Monday’s UK market rebound seemed to coincide with the news that Mrs Clinton had been cleared of any email-related wrongdoing by the FBI.

The implication seems to be that if Donald Trump wins, markets could crash. June’s UK referendum sell-off could look trivial in comparison.

The problem with this argument is that I’m just guessing. There’s no way to know what the outcome of the election will be, or how markets will react. It’s also worth remembering that what happens in the stock market tomorrow is likely to be a short-term reaction. As we’ve seen with Brexit, the picture could be quite different by the New Year.

That’s why I’ve decided to base my investment plans on the facts I do have, and leave the guesswork to the 24-hour news channels.

Are you happy with your stocks?

If you’re still unsure about whether you should have sold any of the stocks in your portfolio ahead of the US election, then the first question I’d ask is whether you’re happy with them.

Are the companies in your portfolio reasonably valued and performing to plan? Do they fit with your overall investment strategy, whether it’s growth, value, or income? If the answer to these question is yes, then I’d sit tight and do nothing.

Whatever the outcome of the election, the world will keep turning. Political changes usually come slowly and are often flagged up well in advance. There will probably be winners and losers in the months ahead, but you’ll still be able to buy or sell shares once the facts are known.

There’s still one big question

Politicians are often accused of failing to keep the promises they made on the campaign trail once elected. A more charitable way of looking at this is that once in power, politicians have to compromise in order to get things done.

Today’s election is a good example. I suspect that whoever is elected president will find their freedom to make dramatic changes limited by both financial constraints, and the opposition or support they receive from Congress.

I’m still slightly worried

The Brexit sell-off was followed by a powerful stock rally in many sectors of the market. My portfolio is worth more than it was at the start of June. As we head into the end of the year, I am — naturally — keen to hold onto these gains.

However, selling now to protect my profits would make no sense. I’d have a load of extra trading costs, and might end up having to pay more to buy back my stocks. In the meantime, I could miss out on dividends, takeover bids and big rallies.

In my view, there’s no option but to sit tight and do nothing.

The post Why I haven’t touched my portfolio ahead of the US election appeared first on The Twelfth Magpie.

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After months of campaigning (or should that be feuding?), Hillary Clinton and Donald Trump will soon learn just how persuasive they have been in getting their fellow Americans to the polls and winning their votes. By midday on Wednesday, we should have a reasonably good idea as to who will be the 45th US president.

A few weeks ago, a Clinton win seemed almost certain. Then last week’s email-related ‘revelations’ undoubtedly handed the momentum to Trump, leaving the result too close to call. But with the FBI dramatically saying it found nothing illegal in the emails, things could change. Even so, markets have now begun to consider the possibility that the divisive Republican could pull off the most unexpected of victories.

Let’s be clear: regardless of who triumphs this week, markets will react. But how should Foolish investors respond?  

What could happen…

It seems likely (but never guaranteed) that a Clinton victory would bring a relief rally of sorts to UK equities. One of the few exceptions to this might be in pharmaceutical stocks, considering the former Secretary of State’s determination to end ‘excessive’ pricing. It won’t be surprising if the share prices of FTSE 100 favourites like GlaxoSmithKline and Astrazeneca come under pressure if Clinton prevails. Energy stocks might also lag the market, given her desire to turn American into the world’s clean energy superpower. 

If Trump wins, expect something approaching the opposite of that just described. A shock victory would put pressure on stock markets in general, at least in the short term. Energy stocks might drop less than most, however, given his positive attitude to the fossil fuel industry. The aforementioned pharmaceuticals could also make gains, simply because Clinton’s views would no longer carry any weight. Over time, of course, the markets will settle, particularly when it’s realised that getting initiatives through Congress will prove extremely difficult (as Barack Obama knows only too well).

Some sectors look set to benefit regardless of who wins. Defence and security spending will surely rise whoever gets the keys to the White House. If this happens, giants like BAE Systems and G4S could benefit. Construction, industrials, healthcare and technology stocks may also get a boost.

…and what Fools should do…

While no one knows how things will play out, we do know that knee-jerk reactions from investors rarely work out well. 

Think back to June. In the post-referendum bloodbath that was British politics, many stocks tanked. The FTSE 100 dropped 6% in just two working days. The FTSE 250, generally regarded as a better reflection of the UK economy, fared worse, down roughly 14%. Days later, the markets rebounded. By October, the FTSE 100 and FTSE250 were both challenging record highs (reaching 7,097 and 18,342 respectively). The former was no doubt boosted by many of its constituents benefitting from sterlings’s fall, the latter by the realisation that the market had overreacted and UK plc would carry on as usual, for now. Not only did those who sold shares in the immediate aftermath of the referendum crystallise loses, they also missed the rally back up.

As such, I suspect the best course of action for UK investors over the next few days is actually very simple: do as little as possible. Clinton or Trump, the next few weeks won’t matter all that much if you hold a sufficiently diversified portfolio.

The post How should Fools handle the nail-biting US election? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This means that if Clinton wins, there’s likely to be a relief rally in the FTSE 100 and other stock markets across the globe. That’s because she’s seen as a status quo candidate in terms of being a continuation of the current administration. That’s not to say that she will keep all policies just as they are, but rather that her approach to being President is unlikely to be as radical as that of Donald Trump.

However, a relief rally may be somewhat limited and short-lived if Clinton wins. She faces a difficult term as President, since it seems likely that the Republican Party will control both the House of Representatives and the Senate. This could make it difficult for Clinton to push through the change and the policies she wants to in the next four years. As such, the reality of what could be argued to be an ineffective government may start to sink in very quickly following a relief rally in the FTSE 100.

No honeymoon?

Following a Clinton victory, there’s unlikely to be an extended honeymoon period for the FTSE 100, since investor attention will turn to the other risks and challenges the global economy faces. Chief among them is a US interest rate rise, which is more likely than not going to occur in December. This has the potential to not only end a relief rally following the election, but to push the FTSE 100 downwards by a few hundred points.

After all, the last time the Federal Reserve raised interest rates it caused a major fall in the value of the FTSE 100. Although another rise won’t represent a step change in policy from the Federal Reserve, it does bring the risk that a tighter monetary policy will choke off the US economic recovery. It also means that the global deflationary pressure that has become a feature of recent years may find it easier to gain traction in the US.

Following the election and a potential interest rate rise, Brexit is likely to be an even bigger challenge for the FTSE 100 to overcome in 2017. Once negotiations start, uncertainty regarding the UK’s economic performance is likely to increase and if negotiations don’t go smoothly, doubts could begin to emerge among business leaders and investors regarding the UK’s long-term outlook.

This is likely to provide a buying opportunity for patient investors, since high quality companies may be on offer at discounted prices. Therefore, even if there’s a short, sharp relief rally following a Clinton victory on Tuesday, there are likely to be a number of buying opportunities in the coming months.

The post Will the FTSE 100 soar if Hillary Clinton wins? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

That’s why the forthcoming election will have an impact beyond the US, on the global economic and business environment, and on stock markets such as the FTSE 100.

America faces a stark choice

And I think it’s even more important because it pitches Donald Trump against Hillary Clinton. America faces a stark choice: does it want to cling on to the past, and to the vestiges of earlier glories, or should it aim for a progressive, optimistic future?

I see Hillary as continuing Barack’s drive for a better environment, for gun control, for fairer healthcare, and a balanced approach to immigration. She aims to build 500 million solar panels across the States, and generate enough renewable energy to power every home in America.

I see Donald as resuming George W Bush’s aggressive, nationalistic approach. He has little interest in protecting the environment, ploughing on with oil, coal and fracking. Despite high gun crime, he’ll do nothing to control the use of guns. He wants to repeal Obamacare, and he will try (I suspect unsuccessfully) to ban immigration.

What’s more, the impact I think he’ll have on the world could be similar to that of George W Bush. Even though some of Bush’s policies were actually quite moderate, his populist, demagogic approach created quite the wrong impression around the world.

Keeping my fingers crossed for Hillary

Remember that during his presidency we had 9/11 and reaction was the invasion of Afghanistan and Iraq. And the seeds were sown for the Syrian civil war. A strong part of any presidency, and people shouldn’t be afraid to say this, is marketing. You have to set the right tone. Trump, if elected, would have to be very careful not to repeat the mistakes of George W Bush. The world is finally looking ahead to the future. It can’t turn back to the past.

Whether Trump or Clinton is elected, there will have to be a strong pro-business stance to help both the USA and support stock markets like the FTSE 100. Trump has, at least, recognised that his country’s manufacturing industry is suffering badly because of intense competition from China; the pretence that everything is fine and dandy can’t be continued. Yet his approach of increasing protectionism is, I think, the wrong one.

Instead I think America must do what Japan has done, and reflate drastically, first with standard QE, and then with helicopter money – printing money to invest, or to provide a universal basic income. I’ve been disappointed to hear none of the presidential candidates even mention the word ‘reflation’.

Fears about what Trump will do if elected could have a negative effect on the FTSE 100. Whereas Hillary, if she can pay more attention to the faltering American economy, could produce a relief rally. That’s why I’m hoping that it will be Hillary that enters the Oval Office in January.

The post Donald Trump vs Hillary Clinton: who would be better for the FTSE 100? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.