Thursday, June 13, 2024

Are Trump and Brexit Affecting My Investments?

It seems as if Donald Trump and the Brexit conundrum have dominated the news for the better part of a year. Not only are we entering into a brave new world in regard to politics and economics, but many investors are rightfully concerned about how these two variables might impact their holdings. Let us take a look at a few key points in order to address the most relevant questions. 

Trump’s Promised Trade War

One of the tenets of the “America First” campaign was to protect domestic businesses by rectifying trade imbalances with foreign countries. Donald Trump placed a particular focus upon China, as the deficit was a staggering $375 billion dollars in 2017. By increasing tariffs on a host of Chinese goods, Trump hopes to narrow this gap.

However, there is a problem with such thinking. As Moneyfarm highlights, trade wars are generally seen as negative situations in regards to global growth. This is even more worrisome if we take into account the potential for cost-based inflation. The markets are shaken and as a result, the value of your investments could very well fluctuate more than normal. 

The Role of the Brexit

Investors are also understandably worried about how the Brexit will affect their holdings. Unfortunately, there is no clear-cut answer here. Futures will instead be determined by whether a “hard” Brexit occurs, or a “soft” Brexit is the outcome. Many feel that a hard Brexit would represent the worst-case scenario, as this would lead to a sudden depreciation of the pound as well as to pronounced global market volatility. The other major point is that it is nearly impossible to predict all of the economic indicators that may or may not be affected by either a soft or a hard Brexit. Thus, many investors have adopted a watch-and-wait stance until more clarity is provided by Theresa May and her administration. 

The real question involves the types of assets currently in your portfolio. Those tied to domestic UK companies and valued in pounds could very well enter into bearish territory. Conversely, holdings backed by the dollar might gain ground (considering that it has increased in value during recent months). Currency traders should likewise be looking at both sides of the board, as Forex positions will be able to leverage a volatile market. 

Should You be Concerned?

It is just as important to highlight the fact that several unknowns could also impact your investments. Perhaps the most concerning involves the deterioration in relations between the United States and Russia. The risk of a geopolitical conflict or a war by proxy will weigh heavily upon investors and naturally, they will be keeping a close eye on such situations as they continue to evolve.

Although Trump and the Brexit are powerful players, many market makers and analysts have already taken some of their effects into account. Therefore, you are not likely to suddenly witness the proverbial bottom drop out nor will you see the markets reach entirely new levels of profitability in the near future.

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