What Donald Trump means for your money

My wife is a television producer so you’d expect her to have a refined viewing pallette. Not so. She watches The Bachelorette, the Real Housewives of Bendigo, and any program where everyday Aussies commentate on their own cooking: “I just knew I’d be going home when my caramel soufflé refused to rise …”

Seriously, her taste in TV is the equivalent of me dumping my AFIC shares and day-trading biotech stocks. Still, while I prefer CNBC and Bloomberg, there’s one show we’re both addicted to: House of Cards.

For those of you too old to work out Netflix, it’s a political thriller that follows the ruthless rise to the US Presidency of Frank Underwood, played by Kevin Spacey.

It’s wall-to-wall sex, drugs, murder and corruption. And apparently the scriptwriters have got it spot on.

Bill Clinton — the future First (Ladies) Man — reportedly told Spacey, “Kevin, 99 per cent of what you do on that show is real. The 1 per cent you get wrong is that you could never get an education bill passed that fast.”

Of course House of Cards has nothing on the real US election: penis jokes, pussy grabbing, private emails. People say they like that Trump says what he thinks. Yet so does my three-year-old, but that doesn’t mean I want to give him the code to the nuclear bomb.

And with our share market falling eight out of the last ten sessions, I’ve had a lot of questions about what will happen to the share market if Donald comes up Trumps.

So here are my thoughts.

What Would a Trump Presidency Do to the Share Market?

One leading Australian fund manager predicts that the Dow Jones will fall 1,000 points, or a 6 per cent drop, if Trump is elected next week. Another celebrated economist has forecast it will be 2,000 points, or a 12 per cent drop, if the comb-over king gets in.

Scary stuff.

Yet the fact that their predictions vary by 100 per cent tells you they may have plucked these figures out of their … Trumps.

Speaking of which, I’ve also tried to consult my favourite stock market sage — my golden retriever, Buffett. However, he was unavailable to comment on the outcome of the US election — and its effect on global markets — because he was sniffing another dog’s butt.

And before you think I’m being flippant, my mutt has form. A few years ago I put his prediction for the share market up against predictions by some of Australia’s leading economists, and he lifted his leg on the lot of them, winning by a surprisingly large margin.

All of which goes to show that I don’t have a lot of faith in predictions.

For all the scary stock market predictions, the truth is that Trump could actually be good for the US share market. After all, he’s pro-business (he’s just not a pro at business), and he plans to drop the tax rate for US corporations from 35 per cent to 15 per cent.

None of this has been costed, of course, and some economists are suggesting it could add $5.3 trillion to America’s national debt. Though if there’s anyone who knows how to go bankrupt, it’s The Donald.

These Are the Crazy Days

The Economist magazine has suggested that a Trump presidency is one of the major risks facing the world. Yet let’s take a chill pill and put it in perspective.

No candidate has ever won after being so far back in the polls, so it’s unlikely he’ll make it to the oval office at all.

But even if he does win, he still has to get his cra-cra plans — like whacking Chinese imports with a 45 per cent tariff — past Congress. And even if he does get a (watered-down, cobbled-together plan) past Congress, we then have to guess what effect that will have on China and, more importantly, how they’ll respond. Then we’ll have to guess what the fallout will be for Australia.
That’s a lot of guessing.

So let’s not guess. Instead, let’s look at some of the crazy stuff that has actually happened. Over the past 120 years or so we’ve had:

  • The First and Second World Wars
  • The Great Depression
  • The Vietnam War
  • The Gulf Wars
  • 9/11
  • The GFC
  • Grexit and Brexit.

And over that same time if you’d invested a single dollar — $1 — in the Aussie share market, it would be worth a staggering $194,439 today. Also over that time we’ve had some shocking politicians … though I’ll leave it up to you to fill in the blanks on who they are.

The takeout from all of this is simple. If the markets plummet on Thursday, be a buyer not a seller.

My investment decisions have nothing to do with politics, because history has proven that the effects of politics are impossible to predict. (President Obama is seen as a socialist in some camps, yet over his time as president the US share market has risen by an average annualised rate of 14.5 per cent. George W Bush, on the other hand, is a rabid Republican yet the share market dropped by an average 3.5 per cent per year over his two terms).

The key is not to get caught up in the soap opera. Remember, politics is show business for ugly people. It’s much more important what happens in your house than in the White House.

Tread Your Own Path!