After an interesting past 24 hours, today we are reminded of one of the key rules to investing: knee-jerk reactions are never the best.
As a Trump victory became increasingly apparent Asian markets collapsed with many traders rushing for the exits with fears of financial Armageddon.
Then we wake up this morning hearing the news that rather than the US market dropping 5% as futures markets predicted, it instead, rose. A Brexit like response.
Our philosophy is investing in businesses and not in trading sentiment, that is a fools game.
The simple reality, if we’d followed the herd yesterday we would have lost money.
So another reminder: Never follow the herd.
But what a Trump presidency does is throw up potential new investment themes that perhaps we can take advantage of. For those, like me, who watched his acceptance speech (I’m sure there are few who did) I was intrigued to hear 2 things:
- He aims to double US GDP growth;
- He plans a massive infrastructure spend.
Point 2 helps point 1 nicely (although it doesn’t help their Government debt position). It’s also a positive for Australia. Construction of infrastructure requires natural resources and it’s why we see BHP & the like rally hard in early trade today. I wont follow the herd here either because there is still much water to pass under the bridge. Dare I say, those plans could run into a brick wall…
Through this we remain focused on investing in businesses we like that suit your risk profile and personal aims. Nothing ever goes up in a straight a line and nor should we expect it.
Ignore the media. Don’t panic. Never blindly follow the herd, they may just be about to walk over the cliff.
Trump may have many plans but as we all too well know, a politician saying what he’d like to do & actually doing it are two very different things. Lets just wait and see.
By: Nick Rundle