You’d better brace yourself for a lot of volatility. Markets don’t like unpleasant surprises. They hate uncertainty. And a possible Trump victory would mean both. Hillary Clinton is largely a known quantity. Trump isn’t. The outside world is hardly likely to stay calm at the news that the U.S. government, nukes and all, is being handed over to an unstable, inexperienced TV personality with a quick temper and a long line of incendiary threats. You should expect stocks, bonds, currencies and commodities to react.
A money manager I spoke to last week said if Trump looks like he’s winning he’d bet on three things: “Gold, guns and germs — or in other words gold, defense stocks and healthcare stocks.”
He figures Trump’s election would cause a dollar panic which would be good for gold (and other hard currencies, such as the Swiss franc). Trump has already vowedto launch currency wars against trading partners such as China and Japan.
Defense contractors should do well: Trump has promised to raise U.S. defense spending drastically. (Note: Gun makers like Sturm, Ruger & Co. RGR, -3.23% , on the other hand, might suffer. They typically do best when their customers panic about Democrats in the White House, and rush out to stock up before the long expected “ban.”) Meanwhile, a Trump victory would be bound to put the entire healthcare industry in the spotlight, including the insurers, the major drug companies, biotechs and others. Investors have been wary of these stocks for fear that a President Clinton would try to bring down healthcare costs by pressuring their high prices, costs and profit margins. It’s hard to be sure what Trump would do, but he has promised to push for massive deregulation.
The implications of a Trump victory wouldn’t end there. It could upend everything from construction stocks, thanks to Trump’s alleged “wall” with Mexico, to Moscow, where investors would hope for an end to Western sanctions. Interesting times. |
