When I interviewed Nick Train of Lindsell Train on 24 June this year I felt I should ask him about his views on how Brexit might affect markets He looked at me wearily (though to be honest he always looks at me wearily) and said "every five minutes spent thinking abut Brexit is five minutes wasted."
When I last saw him a few weeks ago I considered asking him about the US election. But I guessed his answer might be much the same. So I pulled back from the brink (everyone knows how much I hate to irritate a fund manager).
Still, let's waste a few minutes. What might happen to markets if Donald Trump wins? The answer is a bit Brexit. First, America's stockmarkets might fall (shock, horror, etc). Then as it dawns on the US that monetary policy would stay looser for longer, that the dollar might fall a bit (can the US still be seen as a safe haven with Trump in charge?), that Trumpism will almost definitely turn out to be Trump Lite-ism, that his tax plans are pretty pro business and that most companies will carry on selling and making stuff regardless of who is in charge of their domicile, those markets will rebound a bit.
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And if Hillary wins, there's likely to be a short relief rally but not a particularly impressive one. US markets are already super expensive and her victory is all but priced in (markets are generally pretty optimistic beasts). At the same time, a Clinton victory would lead markets to assume that the US Federal Reserve would carry through with its promised rates rise and that the dollar would therefore strengthen. That's a mild irritant for exporters.
More interesting would be a contested election. A nasty period of third world style uncertainty would probably be bad for equities in general. But as in 2000 (hanging chads...) it could be good for commodities (gold in particular its up 20% this year already), for the dollar and for Treasuries. One thing to remember if this happens.
AJ Bell notes that buying on the dips during the discussion about whether George Bush or Al Gore should end up president looked very tempting. It turned out to be a nasty mistake, because the tech bubble was already bursting and taking everything else down with it: what looked like election fear was actually the beginning of a multi wear bubble bursting rout.
US stocks aren't in that kind of bubble today. But they are still extremely expensive. Maybe the best way for long-term investors to not risk wasting any time thinking about the US election in the context of US stockmarkets is just to not be invested in US stockmarkets.
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