It’s official. The dust has settled and Donald Trump is now in charge of the world’s largest economy. While the markets themselves are not (yet) in turmoil, the surrounding geopolitical situation seems to be less stable. With Trump’s policy stance still so unclear, the uncertainty that’s been a driving force in recent month remains. No one knows exactly what he’s going to do.
“On one hand, you would think he’s good for business, that’s what the markets have been thinking,” says Nick Fallon, Senior Financial Advisor, Assante Capital Management. “But as we start delving a little deeper into what protectionism means, it becomes clear that it’s not just going to impact the Mexican and Canadian economies, but also the U.S. There are lots of jobs in the U.S. because of NAFTA. And, as the dust settles, people are going to be looking at that.”
The Trump factor is easily comparable to the Brexit situation in a sense that nobody is sure what it will actually mean from both a political and economic perspective. “Overall, the issue has been and always will be the uncertainty,” Fallon say. “A market doesn’t really care about who wins or loses an election, it just wants the resolution of the issue because there are always investments that can be made in markets. But, we will continue to have uncertainty.”
Having been in the business long enough to make it through a few market crises, including 2008, Fallon is not overly concerned by how the Trump factor is going to play out. He’s also pleasantly surprised by the level of calm and lack of concern being shown by most of his clients.
“I only had one client make an investment decision based on the election,” Fallon says. “Nobody else has called or emailed me to talk about the issues or ask what to do. Meetings with clients are not about what investment decisions you’re going to make this time, they’re about education and helping clients remember why they’re in this investment strategy.”
“Clients get the advisors that fit their personality, so if I have had clients who are worriers and want to make rash decisions; they’ve probably left me by now.”
When building portfolios, Fallon mainly uses managed money products, allowing fund managers he trusts to make the asset allocation decisions. When deciding on a fund manager to work with, Fallon examines the fee component closely and tends to gravitate towards an active management approach.
“I usually go with value oriented, contrarian guys who have been in the markets for long enough that they get it,” he says. “I look for funds that have a lower number of holdings because, as much as the managers won’t acknowledge it, if you’ve got 400 -500 stocks you’re basically the index. I look for managers with maybe 30 stocks. I acknowledge that those funds will be more volatile but if that fund is part of a multi-fund portfolio there isn’t going to be that much incremental volatility.”
In order to best navigate the current markets Fallon encourages other advisors to develop a process and stick it. “I’m not right or wrong all the time – although hopefully I’m right more than I’m wrong - but the point is I’ve always been consistent,” Fallon says. “I do my research and then develop an idea of what I think makes sense for my clients and stick to it. Being consistent makes things much easier and your clients will realize that too.”
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