I won't get into the politics of what happened last night. As my Sicilian Grandfather used to say to all of his grandchildren when we asked him who he voted for, "I voted for the guy who won". Quick thoughts on the effect on our portfolios as I am seriously busy in the middle of earning's season.
First of all, Scott and I are both somewhat contrarian by nature so we were half expecting a Trump victory and our portfolios reflected that with about 30% cash. Some of our thought process was based off of the "movement" of what happened in the UK. I think the base argument for the "movement" is the 30yr old experiment, that is Free Trade, made a ton of sense from a macro economic theory about Comparative Advantage etc but what it didn't account for was small communities getting wiped out. (That and when an almost-incumbent candidate calls the other candidate's supporters "a basket of deplorables"...apparently adds support to the "movement"...funny that).
What a Trump Presidency will bring, among other changes, is less free trade around the world, less corporate taxes (15%), less regulation and huge infrastructure spending (I am not a proponent of Keynes personally).
With regards to global trade, this will ultimately be inflationary. Think about all the cheap goods the US has been buying from China...those will rise in price when they are produced in more expensive jurisdictions like Ohio.. which is the definition of inflation. Inflation is the enemy of long bonds. As I wrote in September (highrockcapital.ca/pauls-blog/correlation-metrics) we sold some of our longer-dated Government of Canada 10yr and 30yr bonds in. We took profits in early September and are glad we did because inflation is the number 1 enemy of long bonds.
Also, with regards to infrastructure spending, this too will not be good for US Government bonds as the US Treasury will need to borrow to spend like crazy. Perhaps Congress keeps him in check as will the Debt Ceiling (which can be moved higher).
For corporations, lower taxes and less regulation will be a boon for business. Maybe that is why the Dow is +61 right now as I type vs Dow Futures -870 at around midnight last night?!
As for the effect on Canada and some of our individual positions, it should be decent for some heavy oil stocks (we own one), bad for forestry (SLA and NAFTA, we own none), good for gold (we own one producer), not good for the C$ (we sold some and bought more US$ two weeks ago).. I don't have time to go thru all of my thoughts and positions but suffice to say we were positioned pretty well with about 30% cash and some strategic positions on.
We are not smart enough to say we saw this coming entirely and were 100% positioned for it but it is probably fair to say that we went into the election in pretty good shape here. Better lucky than smart...my Grandfather used to say that too. He had some other sayings and when I repeat them to my wife and three sons...their eyes roll.