Trump's win is shaking markets. What investors should know

The election of Donald Trump as US president on Nov 5 has unleashed fresh concerns about prospects for Singapore and the global economy.

US stocks soared in the three days following his victory, driven by hopes of lower taxes and deregulation. But it’s uncertain if this momentum will hold in the long run, as his policies could worsen the US budget deficit, push up inflation and complicate the economic outlook.

The mood is different in other parts of the world.

Stocks in Europe and many parts of Asia fell in the days following Trump’s election over worries about the US President-elect’s protectionist “America First” trade policies. These include plans to put tariffs on all imports into the US and a 60 per cent tax on goods from China.

With such mixed signals, what can investors in Singapore do to protect and grow their money?

Here’s what you need to know about investing in the post-US election environment.

What should investors keep an eye on?

The Trump administration will take office on Jan 20. Investors should closely watch global trade relationships as these could impact markets, says Mr Abel Lim, head of wealth management advisory and strategy at UOB.

For instance, if global trade tensions escalate, it may lead to further trade and foreign investment restrictions and shifts in global supply chains.

Heightened tariffs and trade restrictions could also lead to higher inflation worldwide, which would make it harder for central banks to lower interest rates, says Mr Lim, who is in his 50s.

The longer this goes on, the higher the impact on small businesses and households, ultimately affecting global economic growth.

He adds that Trump’s pledge to expel millions of undocumented migrants could lead to labour shortages and inflationary pressures within the US.

At the same time, developments in China will be critical to Singapore and the rest of the world. China will likely be most affected by US tariffs, and this poses headwinds for the Chinese economy.

If China’s fiscal stimulus stablises its economy and boosts domestic consumer spending, it could benefit not just its own market but those in Asia and Europe as well, Mr Lim explains.

Closer to home, the proposed Johor-Singapore Special Economic Zone (SEZ) could provide a lift to the Singapore and Malaysian economies when it takes effect. In a joint statement issued on Nov 7, both governments said they will work towards the signing of the agreement during a leaders’ retreat that is expected to take place before the end of this year.

For companies seeking alternatives to China or Mexico as a manufacturing base, “the SEZ provides a cost-effective production base close to Singapore’s logistics and financial infrastructure, making it an attractive option for foreign investment, infrastructure development and jobs creation,” Mr Lim says.

Another trend to watch is how companies are adopting artificial intelligence (AI), he adds. AI has the potential to transform industries by driving productivity and disrupting traditional business models.

How can you protect and grow your investments?

In times of uncertainty, a fundamental strategy is diversification – spreading your investments across different asset classes, regions and sectors.

“While shifts in the political environment may create uncertainty, it also presents new investment opportunities,” says Mr Lim.

“Staying invested in a diversified portfolio allows Singaporean investors to capture those opportunities and minimise risks.”

This approach helps to balance risks because if one type of investment or market suffers, others may still hold steady.

Another thing you should do is invest for the long term. This allows you to benefit from compounding returns, which involves staying invested and reinvesting dividends and interest to generate additional returns over time.

Mr Lim shares UOB’s Core-Tactical approach, which includes:

• Core investments, which are typically less affected by market cycles and help you progress towards long-term goals; and
• Tactical investments, which refer to short-term opportunities that may carry higher risk.

Focusing on investments in high-quality companies with strong balance sheets and consistent cash flows can be especially helpful.

Sectors like finance, industrials, and communication services may benefit from Trump’s pro-growth and deregulation policies.

On the flip side, renewable energy could be impacted if Trump rolls back environmental policies or repeals the Inflation Reduction Act (IRA). The IRA, signed into law in the US in 2022, provides incentives for green energy and electric vehicles.

Beyond diversification, you can also consider adopting a dollar-cost averaging strategy, advises MoneySense, the national financial education programme.

This involves investing a fixed amount of money in a particular investment product, such as mutual funds or exchange-traded funds (ETFs), at regular intervals regardless of market conditions.

This way, you can buy more fund units when prices are low and fewer units when prices are high, thereby reducing their average cost over time.

Before you start investing, you should consider factors such as your current financial situation, your financial goals, your investment horizon and your risk appetite.

Typically, investments that have higher potential returns will carry higher risks.

Those who are unsure of what to do can work with financial advisers, who can guide you on how to best allocate your assets to manage risks and seize opportunities in different market conditions.

UOB’s bankers, for example, are equipped with digital wealth tools such as the Portfolio Advisory Tool (PAT), which provides data-driven insights to help you optimise your wealth portfolio in line with your risk tolerance.

Investors can also stay updated about market movements with expert analyses such as UOB Wealth insights through a UOB banker or via the UOB TMRW app. These offer insights into economic data and market dynamics so you can make informed decisions.

What if you don’t want to take too much risk?

If you’re less comfortable with taking risks, you can consider building a steady income portfolio through quality dividend-paying stocks, investment-grade bonds (issued by companies with strong credit ratings) and Singapore government bonds.

These investments offer stable and consistent income streams, while Singapore government bonds and investment-grade bonds can shield you against political volatility, says Mr Lim.

What about assets like gold, often seen as a “safe haven”?

Holding a small allocation can help, but Mr Lim cautions against relying too heavily on gold as a store of value. “Although holding gold is often seen as a hedge against inflation, it does not generate income or dividends,” he says.

The same goes with cash. “The cost of holding excessive cash is high as inflation could erode purchasing power over time.”

In comparison, a balanced portfolio of stocks and bonds offers income and potential capital growth that can keep pace with or beat inflation.

Related stories

• Impact of Trump’s policies: US President-elect Donald Trump pledged to impose higher tariffs on trade partners, cut taxes and unwind regulations on energy and finance. How would these affect the world?
• Trump 2.0 and South-east Asia: Higher US tariffs on Chinese imports could result in South-east Asia being flooded with goods from China, and lead to greater trade conflict in the region.

First published in Rethink Your Wealth, a series that provides practical insights and answers on wealth-related topics, to help you transform the way you approach finances.

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