Adviser-to-client template: Paragraphs on the US election

For financial advisers to use with clients. This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients.

Dear Client,

You may be wondering how the election of Donald Trump might impact your investment portfolio. Before we dig into last night’s events, I’d like to assure you that it is business-as-usual from our side and for our investment manager, Morningstar Wealth.

Often the biggest risk in situations like this is reacting impulsively to the fears stoked by headlines in the media. But I’d like to remind you that politics and investing are two distinctly different areas, and we will continue to manage your portfolios to ensure they are diversified and robust.

US Election

Donald Trump has won the Presidency and the Senate, which on paper gives him a clear mandate to enact his fiscal and monetary policies. The House of Representatives remains up for grabs which may curb his ability to deliver on all his plans – depending on how the outcome lands.

The market reaction in the immediate aftermath of the election is commensurate with Trump’s key policies of anti-immigration and protectionism. The US dollar has rallied as investors price in the possibility of trade tariffs. US government bond yields have risen (meaning prices have fallen) driven by a higher probability of inflation as the US labour force shrinks.

However, we are mindful that there is huge uncertainty surrounding the actual policies President Trump might get behind and these moves may reverse.  

Taking a Long-Term View

We will continue to monitor proceedings and will keep you informed if anything material ensues. Regarding your portfolio, it is for circumstances like this that Morningstar takes a diversified approach when managing money.

Your portfolios hold assets like financial stocks and broad equities that should perform well if inflation rises and growth backdrop consolidates. There are also positions like defensive equities and government bonds that should appreciate if the global economy loses momentum.

At the same time, the portfolios have avoided going “all in” on any potential outcome. Instead, your portfolios are robust and constructed so that they might be expected to perform well over the long run, come what may. 

Last, we leave you with two key points.

1. In the face of political uncertainty, it is normal to question whether you should sell, hold or buy. To our eye, the answer is simple… manage risks, stay informed and—most importantly—stay the course.
2. Any turbulence in markets may create great opportunities to purchase assets that will add meaningfully to returns in the future.

We hope you find this perspective helpful and we’ll keep you updated as events evolve. As it stands, we want you to know we’re carefully monitoring proceedings, and we are here to help with any questions you may have.

Regards,

Adviser

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.