The US Election – What does it mean for your Investments?


The lead up to this week’s US Presidential Elections is certainly not like any lead in to an election we have seen before. Enough said on that.

The last 20 years in particular has provided many changes to the investing landscape and we can best describe the changes from more “Traditional” (for the sake of a word) investing to the “Changed World” of investing. History has provided the following.

“Traditional or Historic Investment Environment”

  • US led the world almost solely.
  • Bank stocks (big 4 in particular) were the main staple of Australian investors.
  • Shares exposure typically home bias and little international exposure except for some superannuation funds exposure.
  • Resource stocks like BHP and Rio Tinto seen as must haves in a lot of portfolios.
  • Term deposits 3% to 5% pa rates of return generally the normal.
  • Home loan rates hovered around 6% to 8% pa.
  • Inflation closer to average of 3% per annum.
  • Japan previously the second powerhouse.
  • Federal Government in the main mad on ensuring actions towards budget surpluses and budget deficits seen as a no/no at least in the longer term.
  • Own home ownership seen as family’s biggest assets.
  • World leaders in some ways stereotyped individuals (not too flamboyant) or more stable in their approach.

“Changed World Environment”

  • China emergence as a powerhouse
  • Technology incredibly entrenched in our World
  • Historically low interest rates for savers – the search for good/safe yield goes on and getting harder and harder
  • Historically low home loan and investment property loan rates
  • Home loan ownership seen as very difficult for many due to capital city prices despite low interest rates.
  • Superannuation fast emerging as largest asset for some families
  • America in some ways seen as lost the plot.
  • Non-traditional type stocks providing the best growth for investors.
  • Tech and health care stocks at the forefront
  • Individuals can have access to every share in the World with as little as $1,000 and push of a button.
  • Multi trillion-dollar government debts now the norm throughout the World with returns to surpluses (and no long-term government debt) seen as 30 to 50 years away. Acceptance of this as the new norm.
  • The vast methods and sheer magnitude thereof of the Media can almost “kill” or bring down anyone or action they want to
  • And of course, last but not least by any means this year’s pandemic

What Does It All Mean?

US Presidents will come and go and there will generally be some disruption to markets of some sort – positive or negative or just the usual volatility a little more exemplified until the dust settles – a few weeks or months later.

We might say that this time it is different but there is always an argument for that case. History and time will tell – any prediction is just an opinion – no one really knows.

When it comes to growth investments (essentially shares – of all sorts) we must stress that when the dust settles (even in this NEW CHANGED WORLD) it will always be that shares in good companies that have good products, sound management, are reasonably priced and provide good market exposure will continue to be the way forward in managing share portfolios. This applies with your own ordinary investments, superannuation monies or pension funds.

It is the same with investment properties – location, location, location – being the main catalyst as well as ensuring the property is well priced and well presented.

At Plus1 we are available at any time to discuss issues of this nature with due regard to your investments or financial planning generally.

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