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Trump's surprise election may lead to market volatility, better long-term economic growth

DALLAS — The election of Donald J. Trump may have surprised political observers, but his election and the continued control of Congress by fellow Republicans could increase the odds for his major policy plans to be adopted over the next two years.

Financial markets are likely to remain volatile over the near term — and possibly for months, said David S. Spika, CFA, global investment strategist for GuideStone Capital Management. Markets rallied in the days after a Trump victory, even after signaling sharp declines as a Trump victory was becoming evident on Election Day evening.

"The uncertainty will be high; he has never been in political office before, and that will create volatility for investors," Spika said. "It may also prevent the {Federal Reserve} from raising rates in December, as planned. We don’t really know how the markets will react to that, but that's something else to keep in mind."

Spika cited Trump's proposals for personal income tax cuts, corporate tax reform, higher defense spending and a reduction in the regulatory burdens in the financial and energy sectors as potential catalysts for economic growth. Some Trump policies, however, including renegotiating or repealing existing trade pacts, as well as new tariffs and quotas, could negatively impact economic growth as trading partners might impose similar restrictions on U.S.-made goods.

"As investors, it's prudent to stay calm in periods like this," Spika said. "Back during the Brexit vote [where British voters elected to leave the European Union], those who stayed calm and didn't overreact did fine… Investors should focus on their long-term asset allocation and remain calm: This is a strategy that can help you meet your long-term goals."

To watch the video and read commentary on the election's impact on the market in its entirety, visit GuideStone.org/2016ElectionMarketOutlook.

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