The Unthinkable Is About To Happen

The unthinkable has not only been thought, but it is about to turn into a reality.

US President Barack Obama has given his farewell speech and Donald Trump will soon be sworn in as the next President. So changes are afoot.

The market doesn’t like surprises. It certainly didn’t like it much when Trump won the keys to the Whitehouse.

As events unfolded on that eventful Wednesday in Singapore, and when it became apparent that Trump would reach the all-important 270 votes, the market reacted in the only way it knows how – sell first and think about why later.

Worrying times

Events such as the election of Trump can be worrying for investors. But it can also be an opportunity. And it was.

It is never pleasant to watch the shares in our portfolios fall. But it is precisely in times like those when we need to remain calm, while others are losing their heads.

Just as “Brexit” caused havoc in the markets because nobody expected it to happen, the Trump victory had caused similar mayhem because… it was unexpected

But let us not forget that Donald Trump is a businessman first and a politician second.

Business as usual

As a businessman he understands only too well the importance of compromise.

He will have to negotiate with lawmakers, if he is to put in place any of his grandiose plans. Even then, many of his more extreme positions could be watered down significantly to the point of being almost harmless.

What, for instance, does “America First” actually mean? And how could that affect American companies operate outside of the US?

We don’t know. But it unlikely to mean damaging American corporations’ interests inside and outside of the US. How does that, in any way, put America first?

In the coming days and weeks, if not months, we could see a more conciliatory, a more presidential Donald Trump. We already are.

Make America Great

He no longer has anything to prove to the American people. He is no longer campaigning. He doesn’t have to be a showman, anymore.

So he can get on with the job of “Making America Great Again”, which means making corporate America competitive again. That should be good news for everyone.

According to the World Bank, a 1% improvement in US economic growth could lift developed economy growth by 0.8% and developing economy growth by 0.6%. That is a reason to be optimistic.

Market lessons

The markets learnt an important from Brexit. They now have to learn to figure out Trumpnomics.

Warren Buffett once said: “Excellent investment opportunities come about when superior businesses experience a one-time event that depresses the stock price in relation to its intrinsic value.

Brexit was one of those events. It was a golden buying opportunity. A Trump presidency could be another.

So let’s get ready to look for those “superior businesses”.

A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock – Singapore, The Motley Fool’s free investing newsletter.

Written by David Kuo, Take Stock - Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.