Election results bring certainty, whether you like the outcome or not, says senior PM
Despite predictions of a tight race or a protracted vote counting process, the world awoke Wednesday morning to news of a Donald Trump victory. The former President is now the President Elect and will assume office on January 20th. Its news that markets greeted warmly, with certain ‘Trump Trade’ assets like bitcoin and Trump Media stock soaring. The S&P 500 jumped up as well, something that Shiraz Ahmed is more a product of any result than this result.
Ahmed is the Senior Portfolio Manager and Senior Financial Advisor at Sartorial Wealth of Raymond James. One of the core parts of his practice, too, is in cross-border services. He explained that US stock markets have historically done well in the period following a US Presidential election, and the bump we’ve seen can largely be attributed to that. He outlined some of the medium and long-term opportunities and risks for investors now as Trump begins to take office, as well as highlighting how advisors can go about contextualizing this news for their clients.
“We normally get enhanced volatility closer to the election date, and then things calm down post-election. The market, though, seemed like it was pricing in the potential for a Trump win. When we got up in the morning markets were off to the races,” Ahmed says. “Markets typically and historically crave certainty. I don’t think they care as much about who won, because typically in the 12 months post-election, regardless of who takes the Oval Office, there’s a positive environment on the stock market. That’s the messaging I’ve been sharing with clients.”
For all the market positivity that has come with some of this certainty, Ahmed notes that there is still potential for volatility ahead. He notes just how expensive US stocks have become and how significant of a bull run we have seen over the past two years. He expects that there will be a correction, but the timing, cause, and severity of that correction is impossible to know. It could be that something in US politics spooks markets, or it could be one of myriad other factors. It’s simply something he believes advisors and investors need to stay prepared for.
One of the concerns around Trump going into the election was that his propensity to support significant government spending. There was a fear that his new administration may contribute to an uptick in US inflation, which was apparent in the bond market as yields rose on Wednesday. Ahmed expects US inflation to tick back up again, but notes that both parties in the US seem to share a consensus around deficit spending. He notes, too, that some of Trump’s tariff plans may result in higher inflation in both the US and in Canada, given the closeness of our economic relationship.
As investors digest this election news they are also looking ahead to today’s Federal Reserve interest rate announcement. Ahmed says it is unlikely that one piece of news impacts the other, but says that we may see some changes in Fed policy as the new administration takes power.
Looking at equity markets Ahmed sees some areas of opportunity for investors now. He emphasizes the relative strength of the US economy and the likely positive equity outcomes if either candidate had won. That said he notes there may be some greater uptick in big tech stocks — which appear to have rallied on the back of the Trump trade more recently. Overall Ahmed expects green shoots to appear across the US economy in the coming months, which should drive some stock positivity.
In the immediate aftermath of the election, Ahmed reports that his clients have broadly expressed a sense of relief. There was a great deal of anxiety leading up to the election, and even among his clients who are unhappy with the result, the fact that there was a result has allowed them to breathe. With the outcome known, clients and advisors can make decisions accordingly, and that adds an element of clarity and calm.
While the Canadian immigration website may not have crashed on election night as it did in 2016, Ahmed is expecting an influx of inquiries given his cross-border practice. Again, he expects that he would have seen a similar influx if Harris had won as well. Major political moments tend to create an uptick in inquiries and as a cross-border advisor he needs to be prepared for that.
Advisors on the whole need to now offer their clients context and direction. As they do so, Ahmed believes it’s important to remain objective and non-partisan while offering clients empathy for however they feel about the election. US elections are such emotionally charged affairs, even in Canada they generate strong feelings. Ahmed believes advisors need to acknowledge those feelings, while refocusing clients on the economic and market realities now before us.
“I think just calming people down, because I think there was a lot of rhetoric out there that one candidate would be better for the economy relative to the other. Frankly, data shows that it didn't really matter as much. We're probably going to have a good economy regardless of who won,” Ahmed says. “The market typically wants certainty, and I think that's where as Wealth Advisors, we're in a unique position to be able to have give people a degree of certainty and to not let our emotions dictate our decision making.”
