Trump effect on stock markets
Investment News

Trump effect on stock markets

21st November 2016

In the News: The ‘Trump effect’ on the stock markets - or Not !!!

Just last week, ‘financial gurus’ were predicting doom and gloom if Trump got elected. They said there would be a classic panic reaction: a drop in stocks and other risky assets, and a rally in bonds and other safe-haven assets like gold.

A lot of people bet big money on the stock market falling, and as you know, you can make money by shorting the stock market (assuming it falls).

Oops !!!

The opposite has happened since Trump was elected president. The US Stock market - the S&P500 is up nearly 4% this week. The bond market has sold off, sending interest rates higher and the measure of volatility have fallen.

Those who shorted the market, lost a lot of money.

Moral of the story is a quote from Warren Buffet - ‘Time in the market, is more important than Timing the market’.

Nobody can time the market and consistently win. That’s gambling. All you have to do (according to Warren Buffett’ is to stay invested in the market) better yet an index fund, and reap the rewards of long-term investment.

Yes, there will be an effect of Trump’s policies on the stock market in the long-term, but ultimately he is a businessman first and a politician later. He will lookout for the interests of his businessmen friends and have pro-business policies.

This will ultimately boost the stock market.

However the interest rate hike due this December will have a greater effect than Trump being president in my humble opinion. An interest rate hike mostly results in the stock markets dropping and the 7-8 year cycle of the stock market dictates that the next major recession is due in 2017, according to Tony James the President of Blackstone Asset Management.

Buy - Aerospace & Defence

Since Donald Trump has clearly voiced his support for staying true to the mantra of the Republican Party - ‘Military Might’, aerospace and defence stocks will be long-term winners.

Defense spending will increase as fighting terrorism is centre-stage in his campaign. While the defense budget would not have necessarily shrunk under Hillary Clinton, the consensus suggests that it will certainly grow now that Trump is elected President.

Buy Gold

Stock market hates uncertainty, which means that a win for Trump is seen as a “grey swan” event by the majority of money managers. In this case, volatility is ticking higher, and this boosts safe haven investments such as gold.

Buy Infrastructure

Trump’s “Make America Great Again” slogan is synonymous with bringing jobs back to the U.S. and putting more people to work. He has also made reasonable assertions related to increased spending on infrastructure. More specifically, Trump has voiced that the U.S. could greatly benefit from expending billions on fixing everything from roads to bridges to upgrading airports.

Given Trump’s real estate background and connection with massive construction projects, many anticipate that the win for the Republicans in this election bodes well for stocks of contracting companies.

Sell Emerging Markets

Trump’s surprise victory will likely cast new clouds of uncertainty and lead investors to de-risk their portfolios as expectations get reshuffled.

In this case, the investments bound to be on the chopping block is Emerging Markets. Why? Because Emerging Market equities traditionally fall on the “risky” end of the spectrum, they are more likely to get hit as compared to U.S. large-cap consumer staples in the event of a market wide sell-off.

Adding to that, Trump’s aggressive attitude on “flexing military muscle” could lead to heightened geopolitical tensions and further contribute to a global sell-off across financial markets of emerging market assets.

Short U.S. dollar

With the U.S federal deficit expected to exceed $600 billion by year end, there is likely to be mounting speculation about what could happen if Trump keeps adding to the already-sizeable bill.

Such uncertainty is bound to resonate negatively for the U.S. dollar in the currency exchange market, as investors prepare for political gridlock in the event the deficit spirals wildly out of control.

Sell Alternative Energy

Donald Trump is a big fan of traditional fossil fuels, like coal and natural gas. With that in mind, on several campaign stops, Trump expressed his displeasure of alternative forms of energy, like solar and wind. He called them “expensive” and dependent on substantial subsidies to work.

He will basically eliminate all forms of tax breaks and subsidies that these energy sources have enjoyed. If he is successful in convincing Congress and the American people that wind energy is "killing all the eagles,” the renewable energy sector could see a big decline in both adoption and share prices.

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Impact of Demonetisation in India on Equity Markets
Investment News

Impact of Demonetisation in India on Equity Markets

9th November, 2016

Need for demonetisation

As of 8th November 2016, currency notes of denominations Rs500 and Rs1000 has ceased to be a legal tender, approx. 25% by volume and 86% by value of currency in circulation. The stated objective of the Govt. is to curb black money, curtailing prevalence of fake currency, and countering terrorism financing.

The RBI will issue new currency notes of denominations Rs500 and Rs2,000, which will be made available for exchange starting 10 Nov until 31 Dec 2016. Electronic model of transfers have no restrictions. Restriction on cash withdrawals will slowly be eased over the next fortnight.

Transitory impact is huge

  • In the near-term, this move will hurt economic activity with pronounced slowdown across sectors irrespective of the extent of usage of cash. Risk aversion is likely to inch up manifold.
  • Over the next 1-3 months, we think all sectors barring IT & Pharma will face growth challenges, and in particular hurt discretionary spends, gold and real estate purchases. We are particularly worried about businesses that still need to operate in cash with little access to valid legal tender.
  • We think banks will benefit from higher savings account accretion.

Medium term (4-6 months) implication will still be negative

  • While the black- economy will certainly shrink, the second-derivative impact of the wealth-destruction on the real-economy will still be meaningful, in our view.
  • Financial sector could face higher stress levels in the small & mid-corporate segment which currently is challenged by an extended working capital cycle.
  • Even where cash is accounted for, we expect risk-aversion will remain high for conspicuous consumption items e.g. expensive watches, jewellery, upper end of alcoholic beverages, higher end cars etc.

Long term (12 months) looks positive for few sectors

  • The biggest benefit will be on the fiscal & monetary side. Assuming 25% of CIC amounting to US$ 53bn (83% of net market borrowing) remain untraced (possibly the unaccounted money) and does not get exchanged could have a dual impact of lowering market borrowings or increased fiscal spending.
  • We believe Private sector banks along with Payment and Small Finance Banks will benefit from the increased transparency and from a shift of cash transactions to online channels.
  • We expect Staples sector to recover from the slower demand conditions. From an overall perspective, we remain neutral on discretionary consumption, Car/2W, CV, Cement and EPC/construction.
  • We remain negative on gold and real estate.

An eye on election funding

  • Demonetisation is also likely to impact upcoming state elections in India, with elections in UP, the largest state accounting for nearly 15% of Lok Sabha seats, expected in February, 2017.
  • A significant part of election financing and spending in India is believed to happen in cash and would to be impacted by the move. As per data available with the Election Commission, 63% of even the declared funding for political parties ahead of assembly elections over the last decade was in cash.

What investments to stay away from (in short term)

  • Gold
  • Real Estate
  • Automobiles / two wheelers
  • Banks
  • Cement
  • FMCG
  • Metals & Mining
  • Tractors

What stocks to buy for the long-term

  • EPC / Construction
  • Private Banks
  • Staples

We have the best Portfolio Management Company in India as our partners with audited returns of 25%+ yoy.

Contact me to know more on ‘How you can maximise the returns on your money in India’.

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Save or Invest - Which is right for you
Investing Safely

Save or Invest? Which is right for you?

So, we have been through the first two steps of ‘How to Invest Safely’ series.

  1. Step 1 – Understand the Basics.
  2. Step 2 – Know the 3 Musketeers of Investment.

Now we look at the difference between ‘Saving’ and ‘Investing’, and which is right for you. These terms may sound very similar, but are very different in reality.

Be careful not to mix up the two. Do what is right for your particular situation. If in doubt, ask me what’s right for you.

Saving

‘Saving’, is for people who want to accumulate money towards a particular goal, could be ‘saving for children’s college fees’, or ‘saving for old-age independence’, or ‘saving to buy a home’, etc…

In most cases, people are ‘saving’ money for some time in the future. Since ‘Saving in a bank account’, does not beat inflation, most people tend to save in ‘Regular Savings Plans’, that offer some kind of underlying investment to beat inflation, i.e. mutual funds or index funds. For more information read the following:

  1. The Best Savings Plans in the UAE.
  2. The Guaranteed Savings Plan I took for my daughter.

Investing

‘Investing is a different beast altogether. This is mostly for people who have a lump sum amount of money accumulated already, and want to get returns better than inflation on it.

More often than not, the objective is to ‘Protect’ the money’ that has been saved over a number of years, or a lump sum received from any source.

Note: When investing a lump sum the amount of money, consider the fact that you may not have the latest and most up-to-date information on the different types of investments out there. Always seek expert advice first, then use your judgement.

Investment term

Probably the most important and most underrated factor of all is the ‘investment term’. ‘Investment term’ is nothing but the amount of time after which you need your money back.

More often than not, people make mistakes with this decision and regret it, after losing money. The investment term will dictate, what kind of investment instrument you can get into:

  1. Bank accounts are the safest place for an investment term of upto 1 year.
  2. If you have 1 to 3 years, before you need the money, consider some sort of fixed income investment like Fixed Deposits, Government Bonds or Index based Structured notes.
  3. With an investment term of 3 to 5 years, you are better of with a portfolio of index funds (ETFs) and Structured Notes.
  4. With 5+ years, you can take higher risk, (in return for higher returns) and get into a diverse portfolio that includes all the asset classes mentioned in the 3 musketeers article.

Risk Profile

Risk profile is the ability of an investor to absorb risk. Risk is omni-present, managing risk is key. When you take money out of your pocket and give it to anyone, ‘There is risk’.

The amount of risk depends on ‘Who you give it to’, ‘Their financial strength’, ‘Their ability to pay you back, within the stipulated amount of time’, and ‘What they intend to do with your money’.

The same applies to investing. ‘Who you give it to’, and ‘financial strength’ talks about the organisation you are lending the money to. ‘Ability to pay you back’ is their credit worthiness. ‘Stipulated amount of time’ dictates, what they can do with your money.

‘What they intend to do with your money’, relates to the type of investment. In summary, ‘high risk = high returns / loss’, ‘medium risk = medium returns / loss’, and ‘low risk = low returns / loss’.

Your Financial Advisor

Again, I cannot stress enough - ‘Don’t pull out your own tooth, get expert advice'. There is reason why financial advisors exist.

When in doubt, try and find a financial advisor through your friends, colleagues and relative’s recommendations. A good financial advisor will not cold-call you.

Here is an article on ‘How to choose a financial advisor’.

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14pc in 12 months
Investment Returns, Fixed Income Investments, Structured Products

Clients To Receive 14% Returns in 12 Months

14% returns in 12 months

We are is pleased to announce that the Fixed Income Note from EFG International has matured after just 12 months in operation.

In addition to receiving their full capital back, our clients invested in this note are due to receive returns of 14% for their investments in USD.

Elixir clients were invested in ‘Google’, ‘Amazon’, ‘Apple’ and ‘Intel’, through this fixed income note.

This EFG International Fixed Income Note is just one of a unique range of structured products offered exclusively by us.

Ask A Question

Have a question? Feel free to ask me. Click the button below and Ask your question.

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Investing Safely

How To Invest Money Safely In the UAE

By now, if you have been in Dubai for more than 6 months, you would have been called by 8 banks, 56 ‘financial experts’ and countless other people vying for your attention and money.

The script is often the same and so are the products, with financial advisors a dime a dozen. It is safe to say that most of the advisors and institutions who call you, are out to ‘make a sale’.

Believe me, I get the calls myself.

So I write this article in the hope of showing you what’s ‘Good’, what’s ‘Bad’ and what is downright ‘ugly’ in the investment world in the UAE, at least in my humble opinion. I have been a client of the industry myself since 1998. I started my first ‘Savings plan’ back in 1998 on the advice of a financial advisor who was referred to me by a dear friend.

I respect people who are referred to me because they tend to be honest more often than not, and since I trust the judgement of my friend or colleague who may have used their services.

I joined the company that was my financial advisory firm 5 years ago because I liked what they did for me and the positive impact proper financial planning had on my life. I still am a client of the industry myself with my own investments and insurances that take care of my personal goals. So most of the following advice is also based on my own investment experience.

You see, I have been there, done that, and learnt from my mistakes.

Step 1 – Understand the Basics, and consider the following

[ultimate-faqs include_category=’before-you-invest’]

Step 2 – Know the 3 Musketeers of Investment

The next biggest hurdle you will face is balancing the 3 musketeers of investment. Read about them here.

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Investing Safely

The 3 Musketeers Of Investment

When you invest in anything, you generally tend to worry about only the 3 musketeers of investment, ‘Safety’, ‘Access’ and ‘Returns.

  1. How Safe is my money?
  2. What Access do I have to it?, and
  3. What Returns do I get from my investment?

There is no investment vehicle or ‘asset class’ in technical terms that offers you the best of all the three. Like the 3 musketeers, they complement each other, and each investment objective dictates which one will prevail. For example, look at the picture below and you will understand what I am saying.

Some of the examples illustrated above:

  1. Cash in the bank is Safe, you have access, but no returns.
  2. Stocks are not Safe, you can sell them any time (access), and historically have provided the best returns in the long-term.
  3. Property (real estate) is considerably safe, you cannot sell it immediately at the price you want (access) and gives decent returns depending on its location.

Which investment (asset class) is the best?

Unfortunately, the answer is not so simple, you need to be invested in all of these asset classes in equal proportions. Simply put, diversifying into more than one asset class is the only way to protect your money. Like this article? Please share it with your friends and feel free to comment on this article below. I would love to hear your views. Next step in the ‘How to invest safely’ series is Step 3 – Saving or Investing – which is right for you?

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