The Impact of Uncertainty on Global Investing – Post 4
December 15, 2016
By Jean Jiang
EisnerAmper’s Timothy Speiss moderated a session on uncertainty and its impact on global investing, leading a panel of Maziar Minovi, Managing Director of Investment Strategy Group at Goldman Sachs and Daniel Offit, Co-Chief Executive Officer at Offit Capital. Coverage included:
(1) 2016 President Election Impacts:
Mr. Minovi shared his thoughts on the President-elect Trump policies and impacts on the market and investment. Mr. Minovi stated that everyone really should stay put since the election was just over and the Trump administration policies are yet formed. Looking back at the long history of U.S. economy and stock market, the U.S. has been a leader of the financial industry in the world.
Mr. Offit agreed with him on this and reaffirmed that we should really focus on having a well-balanced and fully-diversified allocation portfolio from a long-term investment perspective. No matter what happens with government changes, the market will react and adjust rationally and investors should be ahead of the game if they stick with their objectives and strategies.
(2) Interest Rate:
Mr. Minovi projected that the U.S. interest rate will be likely increased in December or early 2017. The interest rate hike will change in the yield of the bond market, the foreign exchange rate and global trades. Since the estimated inflows of money from overseas, the adjusted investments in bond market, and the projected change in President-Elect Trump’s policy of deregulating the banking industry and repealing Obamacare, the stock market would inevitable hit record high in a short period time.
Mr. Offit mentioned that the interest rate hike will prompt investors to review their asset allocation in the portfolio and bond holdings. Investors may want to check and rebalance the duration of the bond holdings to avoid the dramatic fluctuation in bond yield due to the sensitivity of bond price to the interest rate change.
(3) Foreign Currency and Global Trades:
Mr. Offit also believed that the shift in expectations for U.S interest rates and economic growth has refueled foreign currency falling in value vs. the U.S. dollar. If the Federal Reserve increases rates, expectation is that the dollar will rise further by drawing money to the U.S. looking for higher returns. The weaker foreign exchange rate will make the exports more competitive and will encourage inflation. Such treads will have a negative impact on U.S. consumers, who will see an increase in the cost of imports such as oil.
(4) Energy Price and Policy
Both speakers believed that since President-Elect Trump opposes climate change policy, proposes to revoke the Clean Power Plan, and favors traditional power generation with oil, coal and natural gas, it’s likely that U.S. would add more supply to the open market, which would further drive oil and gas prices lower. This will make drilling less attractive to investors, as renewable energy generation and energy efficiency investments may create a better return of investment. Unless the Middle East oil market supply and production decreases, the oil price will be likely stay the current price. President-Elect Trump’s energy policy may not “save” the oil and gas industries, since their fates are determined by the global oil market matrix.
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