US election shouldn't affect long-term investment strategy

For advisors, it’s vital to keep clients informed and let them know you are in control

US election shouldn't affect long-term investment strategy
Francis Gingras Roy

The dust is settling on the US election after months of heated debate and headlines. The uncertainty that stemmed from the contest was reflected in my practice by the number of questions I fielded from clients, who wanted to know how the result was going to impact their portfolios. This highlighted a critical part of our duty as financial Investment Advisors.

First of all, their concern was – and is - understandable. As Canadians, and the United States’ biggest neighbour, our investment presence south of the border is significant. For example, if you look at Canada’s allocation in the MSCI World Index, it’s only 3.05%; we are a small cog in the global economy. For our clients, who are all Canadians getting paid in Canadian dollars and spending in Canadian dollars, we tend to allocate a portion of their portfolios to Canadian investments. However, the majority part of their portfolios may be allocated to the US, with the remainder invested internationally. In short, what happens in the “Land of the Free” matters to us.

But as I have been reminding clients, in a long-term investment strategy should focus on broader economic trends and fundamentals, rather than the current administration in the White House. If you're invested for multiple decades, short-term volatility is not an issue. If you are close to retirement, let's say five to 10 years, or if you're retired already, it's important to be exposed to different asset classes like bonds or short-term instruments like cash because that's where you're going to withdraw from.

Of course, short-term volatility can be a good thing and an opportunity to buy good companies at a discount. If in 2022, you had the cash to invest, you could have bought Amazon at a 50% discount, for example. We all know that you must be greedy when others are fearful, but even when we know that, we don't always act on it and investors are mostly scared when market crashes happen.

But I get it. Politics is a game of success and failure, and increasingly an arena for polarizing opinions. Emotions have been heightened, which is not a recipe for success when it comes to investing. The reality is there will always be winners and losers when there are big political changes. Some people may end up being much, much richer than they were before this US administration while some people will experience the opposite, although I hope not.

For my fellow Advisors, amid all the noise and media coverage, discipline is the most important thing when it comes to the investment process. If you look at a guy like Warren Buffett, he doesn't give a lot of attention to macro. He looks at the quality of the businesses that he owns, and that's about it. And he doesn't compare himself to the benchmarks - he stays true to his investment strategy. So, just be disciplined and stay aligned with your investment strategy. The second thing we must do is keep our clients well informed, whether that’s through videos, emails, or webinars. Whatever your method of communication, clients need to feel they are going to be ok, that they’re being kept informed and that you are in control.

Markets like certainty so there will likely be a little less volatility in the short term now the US election has been won. The mood, of course, can change very quickly, especially when you factor in brutal geopolitical conflicts. This is out of our control so stay disciplined, own quality businesses and keep them for the long term. That’s been our “secret sauce” so far.

Francis Gingras Roy is a Senior Investment Advisor at Manulife Wealth Inc.

This is not an official publication of Manulife Wealth Inc. The views, opinions and recommendations contained in this publication are those solely of the author and this publication does not express the views, opinions or recommendations of Manulife Wealth. This publication is not an offer to sell, or a solicitation of an offer to buy, any securities. This publication is not meant to provide legal, accounting, account or other advice. As each situation is different, you should seek advice based on your specific circumstances. Please call to arrange for an appointment. Manulife Wealth makes no representation or warranty, express or implied, as to the accuracy, completeness or correctness of the information contained in this publication.

LATEST NEWS