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The Trump Slump - Don't Panic

For smart investors with available cash at the ready, the near 4% drop in the Aussie share market yesterday (Wednesday) was a definite opportunity to buy undervalued, quality stocks.

It was also an opportune time to reflect on the need to switch off from the day-to-day market noise and focus on your long-term game plan.

Global markets have been highly volatile the last six months, with the lead-up to the US election fanning investor uncertainty and sparking widespread selling. Today was the peak of that uncertainty, but we expect the US and European markets to fall heavily when trading resumes for the next few days.

Having opened the day higher, the Australian market went into free fall by the afternoon as US vote counting put Donald Trump into an election-winning lead ahead of his rival Hillary Clinton.

It then rebounded later in the session, as strong buying activity helped blue-chip stocks to recover some of earlier losses. Among the biggest losers were the major banks and the miners – all already under significant performance pressures. Some saw safety in gold stocks which improved more than 10%.

For investors, the Australian market’s current volatility in light of the US election result should not be a surprise as we had blogged yesterday.

Aussie shares would be particularly vulnerable to this given our high trade exposure as exports are 21 per cent of GDP in Australia against 13 per cent in the US. The Trump victory will mean that the US Fed will not hike official interest rates in December and the Australian dollar would likely to go lower.

The Trump victory to the extent that it leads to falls in investment markets and anxieties about a global trade war will increase the chance of another RBA rate cut in Australia.

Like we have stated previously, investment market anxiety is likely here to stay, but all investors should hold tight rather than get caught up in any mass panic.

If you are unsure about what to do next, please call Stu at Heart Financial Advisers on 1300 861 143.

In preparing in this article, we have not taken into account any particular persons objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision.

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