I’ve noticed a lot of well-articulated advice on political positioning. It is indeed likely that the outcome may impact inflation, growth, interest rates, stock markets, and currency markets. If Trump wins, it is likely to impact markets in one way; if Harris wins, things will unfold very differently. And if it’s a contested, extremely close win for one of the candidates, things may get choppy.
So … how do we position our investments in this situation? You may safely assume that I’ve heard this question before.
First, I have no edge in predicting the outcome. Positioning your investments for a specific outcome goes under a different name: betting. Unless you have more information or better understanding than other market participants, you should rationally assume that the probability of either candidate winning is 0.5.
Second, there’s a giant leap from knowing the winner to laying out the consequences. Expect a bit of random walk, or perhaps random decision-making, after the new president has been sworn in. We know Trump is unpredictable, and we struggle to predict what Harris will do. There will be chains of events that lend themselves poorly to financial forecasting.
Third, even the best thought-out scenarios are just that – scenarios. Remember November 2016? When it dawned on the world that – surprise, surprise – Donald Trump had defeated Hillary Clinton, markets responded by nosediving. Then, very soon, stock prices started to tick upwards instead. Disaster was not upon us, despite, well, a big surprise.
We had more surprises waiting: While everybody expected the dollar to strengthen, like Trump said he wanted, the dollar weakened substantially during his reign.
And, finally, we wouldn’t do our job if we selected investments that only stood to benefit if one particular candidate wins. We look for robust investments, companies with strong business models that are likely to survive and thrive in a lot of different economic environments, come rain or shine. Oh, and please add the words long term.
In short, then: Yes, we are positioned for a Trump victory. And yes, we are positioned for a Harris victory.
PS. Ok, so Trump won. We were positioned for that.
Finn Øystein Bergh
Chief Economist & Strategist
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