Trump or Clinton – how should you position your portfolio?

Added 8th November 2016

Fund managers and fund selectors alike are haunted by the prospect of Trumpian rule, but still deem a Clinton victory more likely. However, it's paramount investors don't leave themselves too exposed to the consequences of a Trump triumph.

Trump or Clinton – how should you position your portfolio?

When uncertainty rides high, gold is the safe haven of choice. So, to protect yourself against a ‘Trump dump’, it probably would make sense to include some of the yellow metal in your portfolio. That’s the solution to the US election dilemma that Tim Peeters’, head of securities portfolios at multi-family office Portolani in Antwerp, comes up with. Peeters has a very high allocation to the dollar, leaving him exposed to dollar weakness which would be the likely result of a Trump win.

“Overweights to both the dollar and gold could generate a decent return in both scenarios, if both assets are held in the right proportion,” says Peeters, who advocates a 1% allocation to gold for every 5% of dollar-exposure as the two are supposed to negatively correlate for any election outcome. “If Clinton wins, the dollar will outperform, while gold will if Trump triumphs. By allocating to both, the losses in one asset class can be made up for by gains in the other asset class,” he adds. “I have chosen a relatively high allocation to the dollar because I still see a Clinton victory as the most likely scenario.”   

Brexit memories

The trading pattern of the dollar has lately been conspicuously reminiscent of pound sterling’s fortunes before the Brexit referendum. The greenback weakened last week on news that the FBI was considering another batch of Hillary e-mails, and then strengthened when it emerged no new evidence had been found. A Trump triumph will therefore almost certainly lead to a market correction and a weakening dollar in the immediate aftermath of the vote. 

For Julian Marks, a global credit manager at Neuberger Berman and a British national, the current US election campaign indeed has a lot of parallels with the UK’s Brexit vote, the outcome of which he characterised as ‘a total shock’. “It was clearly negative as nobody knew, and still doesn’t know, what was going to happen. That’s what makes me so scared about this Trump situation,” he said, speaking at the Expert Investor Netherlands forum last week.

“Obviously I don’t want Trump to be elected. It’s the total unpredictability and it's the question what it will do to world order and world stability that worries me most,” he added.

“If Clinton wins, the dollar will outperform, while gold will if Trump triumphs. By allocating to both, the losses in one asset class can be made up for by gains in the other asset class” - Tim Peeters

The experience of the Brexit vote, when most investors had been discounting a victory for the ‘Remain’ camp, has made them position themselves more cautiously this time.

David Karni, head of fund selection at the Italian bank BCC Risoparmio & Previdenza, has reduced his exposure to US equities in the run-up to the elections.

"The reason is the imbalance between the modest upside resulting from a Clinton victory versus the volatility in the short term if Trump wins. We don’t believe in the polls." 

continued on next page

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About Author

Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.



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