America plays its trump card #investments
There have been many events since 2008 that have spooked the financial markets but Brexit and Donald Trump winning the US presidential election must be the most nerve-jangling for investors. Clinton had plans that were seen as negative for the pharmaceutical industry but Trump also seems to be a threat to Obamacare that could also have a negative effect, as well.
The share price of GlaxoSmithKline went as high as 1700 as the pound depreciated against the dollar but has since fallen to 1544.50 on the fear that curbs could be introduced on pharmaceuticals in the US. Many investors are getting out of pharma and into financials but GSK still seems like a good choice given it has a PE ratio of under 10 and pays quarterly dividends that still give small investors a good yield.
The FTSE 100
The FTSE 100 went back up over 7000 but is down today at around 6750 and the falls in the FTSE 250 have been even more negative for investors. Many investors are hoping for a ‘Santa rally’ as shoppers go out and splurge on Christmas. However, debt levels are at an all-time high and so it could be a thrifty Christmas.
A Trump presidency
Predicting what Donald Trump will do when he becomes president could help us make investment decisions but he is unlikely to do all the things he has claimed he will do. Will Trump build a wall between the US and Mexico? Maybe a kinda wall, he was speaking figuratively so he could increase security on the border but won’t be ordering billions of bricks! I think the rest of the Trump’s political rhetoric was peppered with metaphors too. So what will we actually get? We will get a right-wing US government, more inclined to military action and more inclined to tax cuts and austerity. The world will not be a better place under Trump.
I’m still optimistic about the future and many of my holdings can be sold at a profit. One of my investments on the AIM is in profit and I see more potential for Verona Pharma. Solo Oil has been sold off by a major investor but there is renewed interest and they now have some upside potential too. Premier Foods got hit again by poor autumn sales and the mild weather was said to be to blame. The winter will probably be mild too but their improved marketing should lift sales through Christmas and the new year. I don’t expect a sudden spurt of growth in the share price but a gradual appreciation which could eventually see 100p a share. It is up another penny this morning.
Article 50 is likely to be triggered in March. Will that crash the market? I think there could be a sharp drop and a recovery, so there will be opportunities to buy there. I might take a position so I can take advantage of that should there be bargains. With the Trump presidency starting to have an effect, could a trade deal with the US have a positive effect?
In the short-term, I will be looking for bargains as the market looks like being unstable for some time. I’ll also reduce my holdings and have enough cash to take advantage of new year opportunities.