The US stock markets experienced turmoil a week before the election. The volatility peaked during the final hours of the election, with futures markets plunging steeply as Trump looked as he was headed to victory.
As the dust settled and the election results were unveiled, stock markets climbed at day’s end and computer screens were much greener than in previous days.
With the Republican Party sweeping both houses of Congress, it is clear that Trump’s tax cuts and fiscal policies will be enacted. Asset Plus Fund Management is positive about the US equity market. Over the long term, it will likely outperform because of the tax-cut policy and the relatively weakened dollar against the yen and euro, which will help boost corporate profit and earnings per share.
Dissecting Trump’s proposed policies, it is seems clear that the construction and logistics sectors will benefit from Trump’s infrastructure spending plan to improve roads, railways, airports and ports. Energy sectors such as petroleum, coal, exploration and oil rigs will benefit from Trump’s ruthless foreign policy targeting the Middle East, along with his stance on the domestic fossil-fuel industry.
Moreover, the healthcare sector will most likely regain its attractiveness after being pressured during Hillary Clinton’s election campaign, during which she promised to address unjustified drug pricing. In addition, there is a possibility that Obamacare could be repealed and replaced by a health-savings-account system, which would put the healthcare sector back on the map.
Most important, the financial sector will outperform when consumption and inflation yield curves get steeper, thus boosting the profitability of banks.
Furthermore, Trump has also promised to dismantle the Dodd-Frank Act, which regulates banks that are deemed too big to fail.
Investors could take this opportunity to invest in promising US stocks with the assurance of long-term expected returns. Those who do not have direct access to US equities or lack expertise in stock selection and timing tactics may approach professionally managed FIF (foreign investment fund) mutual funds with exposure in the US market.
However, in addition to corporate tax, Trump is in favour of lowering individual income tax. The tax savings will mostly be spent on consumption, thus pushing inflation higher. Therefore, the US economy will grow; its inflation yield curve will get steeper and cause a negative real interest rate.
Correspondingly, gold will be a good alternative asset when the interest earnings from financial products are perceived as negative relative to inflation. In the short term, gold continues to be a safe haven in the midst of the huge market volatility people are experiencing right now.
In any case, many other policies of the new president, such as on trade, are waiting for experts to follow up on closely. We also need to observe the widening fiscal deficit as a result of tax cuts and excessive government spending, while public debt is at its ceiling and private debt seems to be the only way to finance projects. This could result in rising borrowing costs in the future.

Investment contains risk. Everyone should thoroughly study prospectuses, product features, return conditions and risk before investing.
Contributed by Asset Plus Fund Management