deVere: US mid-term results could trigger financial market bounce
07 November 2018 London
Image: Shutterstock
The midterm elections result, that has handed control of the lower house to the Democrats, is likely to trigger a global financial markets bounce, according to Nigel Green, founder and chief executive of deVere Group.
In his article, Green predicted a divided Congress will limit President Trump's scope for waging trade wars.
Green stated this “gridlock in Washington will stall the White House’s bid to deregulate banking and industry, limiting the relief rally”.
He added: “The Democrats gaining control of the House of Representatives is likely to drive a rally in US financial markets into the year-end. This US bounce can also be expected to positively impact global financial markets, given the high correlation between Wall Street and risk assets elsewhere.”
But Green also predicts it can be reasonably assumed this rally in US financial markets could be “relatively short-lived as legislative gridlock in Washington could then offset it”.
Green stated: “This will halt deregulation legislation, which in turn will hurt sectors such as banking, energy, industrials, and smaller companies that stood to gain most from looser controls. The gridlock also means that fiscal policy will largely be maintained as it is, with no significant changes to spending or taxation.”
He suggested: “Portfolio diversification is the best way for investors to mitigate risks and take advantage of the opportunities that present themselves.”
“Indeed, investors’ portfolios should be diversified enough to see any market outcomes as an opportunity. A well-diversified portfolio should always include several industrial sectors and asset classes, as well as geographical regions.”
In his article, Green predicted a divided Congress will limit President Trump's scope for waging trade wars.
Green stated this “gridlock in Washington will stall the White House’s bid to deregulate banking and industry, limiting the relief rally”.
He added: “The Democrats gaining control of the House of Representatives is likely to drive a rally in US financial markets into the year-end. This US bounce can also be expected to positively impact global financial markets, given the high correlation between Wall Street and risk assets elsewhere.”
But Green also predicts it can be reasonably assumed this rally in US financial markets could be “relatively short-lived as legislative gridlock in Washington could then offset it”.
Green stated: “This will halt deregulation legislation, which in turn will hurt sectors such as banking, energy, industrials, and smaller companies that stood to gain most from looser controls. The gridlock also means that fiscal policy will largely be maintained as it is, with no significant changes to spending or taxation.”
He suggested: “Portfolio diversification is the best way for investors to mitigate risks and take advantage of the opportunities that present themselves.”
“Indeed, investors’ portfolios should be diversified enough to see any market outcomes as an opportunity. A well-diversified portfolio should always include several industrial sectors and asset classes, as well as geographical regions.”
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