In­vest­ment man­agers cau­tious

Trump’s election cre­ates an un­cer­tain en­vi­ron­ment un­til poli­cies are clearer

Baltimore Sun - - ELECTION 2016 - By Sarah Gantz sarah.gantz@balt­sun.com twit­ter.com/sarah­gantz

Fi­nan­cial an­a­lysts and wealth man­agers warned of an un­cer­tain in­vest­ment en­vi­ron­ment af­ter Don­ald J. Trump’s up­set win of the pres­i­den­tial election.

Af­ter an ini­tial swoon as Trump’s sur­prise win grew ev­i­dent Tues­day night, mar­kets set­tled down af­ter the New York busi­ness­man’s ac­cep­tance speech, in which he ac­knowl­edged Demo­cratic nom­i­nee Hil­lary Clin­ton’s ser­vice to the coun­try and called for unity — a de­par­ture from the more in­cen­di­ary com­ments that char­ac­ter­ized his cam­paign.

On Wed­nes­day, the na­tion’s stock mar­kets opened un­set­tled but bounced up af­ter Clin­ton’s con­ces­sion speech. The Dow Jones in­dus­trial av­er­age ul­ti­mately climbed 256.95 points, or 1.4 per­cent, to 18,589.69. It was briefly up 317 points.

The Stan­dard & Poor’s 500 in­dex gained 1.1 per­cent to 2,163.26 The Nas­daq Com­pos­ite In­dex also rose 1.1 per­cent to 5,251.07.

Still, lo­cal and na­tional fi­nan­cial ex­perts said the U.S. and global economies could be in store for a rocky ride, cit­ing Trump’s lack of gov­ern­ing ex­pe­ri­ence and un­cer­tainty about his fu­ture poli­cies.

“Mar­kets could go down ma­te­ri­ally be­cause Trump is such a wild card,” Jeff Rot­ting­haus, man­ager of the U.S. Large-Cap Core Eq­uity Strat­egy for T. Rowe Price Group, said in a state­ment.

“Buckle your seat belt,” said Greg McBride, chief fi­nan­cial an­a­lyst for Bankrate .com. “Over the next sev­eral weeks and com­ing months, un­cer­tainty will reign. There will be a lot of volatil­ity, a lot of ups and downs, sim­ply be­cause we don’t know. We don’t know what’s go­ing to change, when it’s go­ing to change or how much it’s go­ing to change.”

Trump’s cam­paign prom­ises — such as grant­ing tax cuts with­out off­sets from greater rev­enue, rene­go­ti­at­ing the North Amer­i­can Free Trade Agree­ment and pos­si­bly with­draw­ing from the World Trade Or­ga­ni­za­tion — would bring “abrupt, sig­nif­i­cant changes” in U.S. fis­cal, trade, immigration and tax poli­cies, and could have a strong im­pact on the econ­omy both here and in­ter­na­tion­ally, T. Rowe Price in­vest­ment man­agers said in a Thurs­day morn­ing memo.

Ex­perts with the Bal­ti­more-based money man­age­ment firm also ex­pressed con­cern that his poli­cies could drive up the na­tional deficit and long-term debt.

Clin­ton’s decades of pub­lic ser­vice and role in her hus­band’s ad­min­is­tra­tion gave in­vestors a good idea of how she would gov­ern and what her poli­cies would have looked like, McBride said.

But in­vestors know much less about Trump, who has no gov­ern­ing ex­pe­ri­ence, he and others said. This, plus vague de­tails about Trump’s poli­cies, add to the un­cer­tainty that could rat­tle the mar­kets in the months ahead.

At the same time, fi­nan­cial ex­perts ad­vised against knee-jerk in­vest­ment re­ac­tions.

T. Rowe CEO Wil­liam Stromberg en­cour­aged peo­ple to con­sider the con­text of this his­toric election — a bull mar­ket in which the econ­omy has been steadily grow­ing since about 2009.

“It’s al­ways im­por­tant to keep both feet on the ground and re­mem­ber there are cy­cles to this busi­ness,” Stromberg said in an in­ter­view.

As busi­nesses and in­vestors re­cal­i­brate, they will be watch­ing whom Trump ap­points to his Cab­i­net and key lead­er­ship po­si­tions.

With lit­tle in­for­ma­tion about Trump’s own gov­ern­ing style, the ex­pe­ri­ence of the peo­ple ap­pointed to key po­si­tions could of­fer in­sight to how the Trump ad­min­is­tra­tion will ap­proach tax re­form, immigration and trade, said Eric D. Brot­man, pres­i­dent and man­ag­ing prin­ci­pal of Brot­man Fi­nan­cial Group Inc. in Ti­mo­nium.

“If he doesn’t try to be the bright­est bulb all the time, he could at­tract some tal­ent and take us in a new di­rec­tion,” Brot­man said.

Sin­gle-party con­trol over the House, Se­nate, White House and, pre­sum­ably, the Supreme Court, will give Repub­li­cans power to get more done, such as tax re­form, which could be good for busi­nesses, said Karyl B. Leg­gio, a pro­fes­sor of fi­nance at Loy­ola Univer­sity Mary­land.

The mar­ket’s re­bound Tues­day night fol­low­ing Trump’s ac­cep­tance speech and pos­i­tive per­for­mance Wed­nes­day is a sign that in­vestors and busi­nesses are com­ing to terms with a dif­fer­ent ad­min­is­tra­tion than they an­tic­i­pated, she said.

“Your first con­clu­sion from to­day is the mar­ket doesn’t think a Trump pres­i­dency will be a dis­as­ter,” Leg­gio said.

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