What the next Trump’s policy means for Australia and your retirement
Generally, I do not like to discuss politics. I never get involved in any political debates or arguments, and most certainly not when it concerns another country.
But the latest election in America might have impact on us all, and if this might be the case, I will start paying attention to be prepared what consequences the new president and his policies might have on Australia’s economy, market behaviour and ultimately your retirement.
So today, I would like to review Trump’s planned policies, are they going to be positive or negative for the market and what impact they might have on Australia and subsequently your money.
Let’s remind ourselves first that in 2016 when Trump was elected the president for the first time, markets surged by 38%.
This time, just over the last 5 days S & P 500 has already risen by 4.72% and Nasdaq by 3%. As a matter of interest, Tesla let by Trump’s supporter Elon Musk, jumped by 13%. So it appears that history is kind of repeating itself.
Many American investors believe that Trump’s victory is due to his planned economic growth and more market-friendly policies, such as lower corporate tax rates or improvement of domestic services and production.
But not everyone was celebrating. It is a known fact that climate change is not on Trump’s agenda, therefore investments in renewable energy stocks fell.
And of course, the big issue of immigration, where Trump has been advocating on reduced immigration to the country, but even more importantly impose targeted tariffs on China, Mexico, Canada and the European Union.
As you can see, Australia is not on the list, but that does not mean Australian economy won’t be affected. But if such tariffs are to be introduced, this might impact us all. How?
Trump’s tax cuts and deregulation planned policies have already seen the US market going up, however over longer term, that could create a real concern of inflationary pressures due to higher tariffs, slower growth of labour force, and growing budget deficit.
All of above will have impact on every economy, but for Australia a real issue relates to trade.
Trump is planning on introducing 60% levy on Chinese good and even 20% on European and Japanese imports.
That will disrupt global trade, introducing slower economic growth and that will eventually impact Australian economy.
If Trump decides to go to the trade war, although not directly with Australia, it will have a major negative impact on Australia, especially our resources sector.
But the outcome will also depend on how other countries respond to Trump’s hard ball game.
I listened to many podcasts and read lots of articles on this topic, and it has been said that Trump, although sometimes presenting a questionable behaviour for a president, is a businessman at heart and he loves to make deals. So it is very likely that some kind of a deal might be struck between America and China.
We heard of similar threats during his last presidency, and it didn’t turn out bad, although Australian dollar dropped by 10%.
Just as a matter of interest: Did you know that only 30% of Australians would have voted for Trump?
So what should you do now? How should you apply this information to your investments, your portfolio?
While the US election is always important, there are many other forces that impact the market, its performance and fluctuation or volatility.
You should remain focused on your financial goals and objectives. As we say, asset diversity is the only free lunch in investing.
Your portfolio should be well diversified through different asset classes, different geographies. It is essential to understand not only your real risk profile, but also the timeframe of your investing.
And your investment portfolio should be purpose build, for example your superannuation investment portfolio and your pension fund portfolio have different financial goals, one is for long-term saving and accumulation, the other is de-cumulation, so providing pension payments to you, so obviously having different purpose, those accounts should not be built in the same way.
If you are unsure as to how you should structure your superannuation, pension, or investment portfolios, contact our office, or visit our website to book a meeting either with myself or Shaun Jones, the other financial planner in our practice.
Strategy to be well prepared for retirement is essential but creating a well-diversified and purpose-built investment portfolio is just as important, but it is different for each investor, therefore requires a personal discussion.
We are looking forward to speaking with you soon,
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
