Market volatility on the horizon following Trump victory

Investors should brace for near-term volatility following the election of Donald Trump as U.S. president. But the news isn’t necessarily bad, as some sectors may benefit from his victory, says Peter Hardy, vice-president and client portfolio manager at American Century Investments in Kansas City, Mo.

“The election of Donald Trump was another sign that the political movement of populism is being embraced worldwide,” says Hardy. “Whether that’s Brexit or Trump’s election, there’s a lot of uncertainty, [which] is leading to a high level of volatility worldwide.”

Still, as Hardy points out, “there are net beneficiaries potentially of [the] Trump victory.” He cites catalysts such as less regulation and the potential greater defence spending, as well as changes in health-care policy. “Those sectors could be beneficiaries,” he says.

Read: How to protect portfolios under Trump

“Going into [the U.S. election], we were overweight energy, had a healthy weighting in financials and we were overweight health care,” Hardy adds. The good news is “all of those sectors have seen a positive response to Trump’s election, and part of that is by virtue of the perceived changes in policy towards regulation.”

When it comes to health care, says Hardy, the sector is a mixed bag, “with certain beneficiaries like drug companies potentially [coming out on top], depending on whether we see policy changes towards the Affordable Care Act impacting facility or diagnostic companies.

“Our preference is for those large pharma or medical device companies, and that shouldn’t change. Within financials, banks are attractive . . . and an increase in interest rates would benefit the banks.”

Read: What does a Trump presidency mean for U.S. employers?

There are challenges, however. “There are certain impediments to economic growth that could occur due to changes in immigration policies or trade policy. And there are no certainties right now, given where we are one day after the election.”

The best approach, he says, is to continue seeking the best risk-return scenarios, particularly through “companies that are selling most attractively versus their fair value and downside value.”

“What you saw initially was a sell-off of both equities and the U.S. dollar and commodities,” says Hardy. “Gold rallied and certain currencies rallied versus the U.S. dollar, but [those effects] have abated.”

This article originally appeared on the website of our companion publication, To read the article in full, see Where to invest in post-election U.S.” And for more on market developments since the election, see “Trump rally in stocks still has legs.”