Donald Trump is on the ropes. In any case, there are already a number of countdown pages online displaying, second by second, the time remaining until the end of the 45th presidency. And according to the latest Politbarometer, only 28 percent of Germans believe that Trump will reach the regular end of his term. The majority expect his time in office to end prematurely.
The reason for this sour mood is, not least, the events of August. The riots in Charlottesville and Trump's failure to distance himself from far-right violence, as well as the tensions in the North Korea conflict, are causing investors concern. „Doubts are growing as to whether the US administration will be able to implement any of Donald Trump's election agenda at all,“ analyst Dirk Gojny of Essen-based National-Bank told Reuters. Numerous business leaders, among them the heads of pharmaceutical group Merck, chip manufacturer Intel and sportswear maker Under Armour, have already turned their backs on the President's manufacturing council.
Events like these cause a great deal of temporary turmoil, particularly on the world's stock markets. Investors then tend to comb through every statement made by those involved for clues to future market developments and to hedge themselves against possible scenarios. „But over the long term, approaches like these simply cost returns, because in the drive to avoid risk you systematically miss the surprise upward moves of the financial markets,“ says Philipp Dobbert, chief economist at Quirin Privatbank, pointing to 2016: „Contrary to general expectations, the financial markets did not respond to Brexit and, in particular, the election of Trump with price slumps; in some cases they even marched to new highs.“
Far more successful over the long term are investors who choose precisely the level of risk – and thus the equity allocation – for building their wealth that suits their own goals and needs, from the point of view of returns and, indeed, of risk. The prerequisite for this is that investors free themselves from forecasts and from the performance of particular industries and markets. At quirion, this is achieved partly by spreading your assets across types of securities, countries, industries and currencies. The more broadly a portfolio is diversified, the smaller the range of fluctuation and thus the risk of being significantly affected – for instance by a political or economic crisis.
Only when your own needs or goals change should the risk allocation be adjusted too – but not on the basis of some market assessment, however well founded. Because such an assessment adds, on top of the capital market's risk that can't be fully avoided anyway, the risk of forecasting – with all the potentially negative implications for returns.
