That was a surprise. The US has now voted and woken up to its own Brexit. The Canadian immigration website crashed as a result of the significant increase in the volume of traffic with enquiries to immigrate.  It has created a great deal of uncertainty on economic policy, the outlook in the US and how this may impact the rest of the world (Studies have shown however that presidential outcomes actually have little impact on market returns).

The Australian market initially fell 3% yesterday when the unexpected became likely. Today it is currently UP 3%. Clearly there was initial concern about the impact of a Trump presidency. Perhaps the turnaround is based on the realisation that the extreme rhetoric before the election may be very different from reality? The balancing factor is that his ability to carry out some of the ‘policy’ statements is restricted. The support that he would need is simply not there for some of the extreme promises that he made pre-election. He certainly wouldn’t be the first politician to make populist statements in order to appeal to a certain voter and then to contradict them once elected!

Some policies mentioned would help boost business – increasing infrastructure spending (‘to the best in the world’) and also significant tax reform. This could be very good for the economy and markets. The ‘known unknown’ will be trade policy direction and this will have the most significant implication for growth both in the US and the rest of the world.

I would also expect continued volatility. Leaving part of the portfolio in defensive assets as a buffer is usually a good idea and allows for flexibility if an unexpected opportunity arises.

Of course he could be all talk and no action. Time will tell.

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Brett Dillon is an Authorised Representative (No: 265081) of Solar Financial Advisory Pty Ltd (AFSL No: 431915).
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