For all the market positivity that has come with some of this certainty, Ahmed notes that there is still potential for volatility ahead. He notes just how expensive US stocks have become and how significant of a bull run we have seen over the past two years. He expects that there will be a correction, but the timing, cause, and severity of that correction is impossible to know. It could be that something in US politics spooks markets, or it could be one of myriad other factors. It’s simply something he believes advisors and investors need to stay prepared for.
One of the concerns around Trump going into the election was that his propensity to support significant government spending. There was a fear that his new administration may contribute to an uptick in US inflation, which was apparent in the bond market as yields rose on Wednesday. Ahmed expects US inflation to tick back up again, but notes that both parties in the US seem to share a consensus around deficit spending. He notes, too, that some of Trump’s tariff plans may result in higher inflation in both the US and in Canada, given the closeness of our economic relationship.
As investors digest this election news they are also looking ahead to today’s Federal Reserve interest rate announcement. Ahmed says it is unlikely that one piece of news impacts the other, but says that we may see some changes in Fed policy as the new administration takes power.
Looking at equity markets Ahmed sees some areas of opportunity for investors now. He emphasizes the relative strength of the US economy and the likely positive equity outcomes if either candidate had won. That said he notes there may be some greater uptick in big tech stocks — which appear to have rallied on the back of the Trump trade more recently. Overall Ahmed expects green shoots to appear across the US economy in the coming months, which should drive some stock positivity.
In the immediate aftermath of the election, Ahmed reports that his clients have broadly expressed a sense of relief. There was a great deal of anxiety leading up to the election, and even among his clients who are unhappy with the result, the fact that there was a result has allowed them to breathe. With the outcome known, clients and advisors can make decisions accordingly, and that adds an element of clarity and calm.
