I got asked the question of what would happen before he won. And now that he has, I am getting a bit inundated. But does it affect you?
It is unlikely that as a medical professional Trump’s winning will affect the hours you work. The income you generate from your medical business? Maybe. Your ability to generate wealth? Definitely.
But you will be in two camps. You either love him or hate him.
I just admire his ‘don’t give a damn’ and ability to bounce back attitude. But that is about it. It says a lot about a country that is prepared to turn a blind eye to some of the things he has said and done.
But to be honest, we don’t really give a damn about that either.
Career politicians seem to forget that, at the end of the day, voters care about themselves. They don’t care about the country, and they don’t care about the credibility of politicians. It’s always the case of what the country can do for me rather than the other way around. Trump is not a career politician and is probably the only politician who gets this.
This is the reason voters went for Trump. And this is also the reason we decided to keep Scott Morrison and his Labor Party away from the Federal Government in 2019. We did not want to lose the benefits of negative gearing or pay more taxes to solve our country’s debt issue.
With Trump, voters think lower taxes, friendly business policies, and job protection schemes will be put in place. The fact that he lies, is a convicted felon, and is generally not what most would consider a nice person is irrelevant.
Which brings me back to the question – What does it mean for you?
All we care about is what will happen to our business income, stock portfolios and the economy. Remember, whatever happens in the US eventually hits us here.
Well, the news is not good in the long term. In the short term, I think the results will be a bit mixed.
Trump will give out billions and take on trillions in debt. But he knows he is in for only 4 years, so all he will concentrate on is the next 4 years. He, like all politicians, including our own, doesn’t give two hoots beyond the next 4 years.
From an economic point of view, I think we are going to see mixed results. The US market will, in the short term, feel good and with tariffs against imports which means US companies will be more profitable.
How does that help Australia? It doesn’t. That is because our exports go to China, and China is expecting a tariff hike of 35%. If China sells less to the USA, then China buys less from us.
If we sell less, we make less profit. Less profits mean jobs may be lost, and the government gets less taxes from corporate profits and employee taxes. The Australian economy slows down.
In the long term, tariffs never work. The reason the world economy took such a long time to recover during the Great Depression of 1929-1939 was because countries tried to protect themselves.
There’s more. Those tax cuts and increased funding need to be paid for. That means the USA will borrow at a time when it needs to pay down its debt. And this will affect the US and our economies in the long term.
What about our share portfolios? Well, if I knew the answer to that, I would not be writing this article but sitting on a yacht sipping a multitude of cocktails. So, I will guess. And remember, I am not a financial planner, so what I will tell you is information I have picked up from others who are way more intelligent and good looking than I.
The USA share market will probably go up – because of business-friendly policies, tax cuts and those tariffs will boost short term profits. This is based on what has historically happened, so I do not expect anything different to happen.
I explained that the Australian economy may get hit with Chinese tariffs, so you would expect share prices in Australia to fall or remain stable. But what I have found is that whatever happens in the US generally comes here. Besides, a lot of the Australian stock market is made up of companies that are diversified, so they will continue to make money. Only those that have a heavy reliance on China are likely to be affected. The thought is that the Australian stock market is likely to do what it has historically done. Over the long term, it will go up.
But I will also leave you with this thought. A week before the 2016 US General Election, professional economists thought the stock market would crash and crumble.
Well, in Trump’s first year in office, the US stock market returned 21%, roughly double the long-term historical average. And in Biden’s first year, the US stock market trumped Trump, gaining a whopping 27%.
And this is the problem. We are all too concerned with the short term when we should be concerned about the long term.
Last week, the Barefoot Investor sent me an email explaining why we should all ignore the noise of US presidents and anything short-term. He gave me this example.
You invested $US10,000 in the US stock market in 1948.
If you’d only invested during Republican presidencies, your money would be worth $312,000 by 2023, according to data from Schwab Investors. But if you’d only invested under Democrat presidents, you’d have $1.2 million.
By that calculation, you don’t want President Trump at the White House.
But what if you just invested the $US10,000, and you didn’t give a toss about who was in the White House and just kept holding the entire time?
You’d have … $37.8 million!
And I know what you are thinking. That is the USA. What about Australia? Well, these long-term numbers are similar for Australia, too.
It’s just a reminder. It doesn’t matter really who is in power. What does matter is that you buy and hold and let the market do its magic. Everything else is just noise.
The comments in this publication are general in nature, and anyone intending to apply this information to practical circumstances should seek professional advice from a Financial Planner to independently verify their interpretation and the information’s applicability to their particular circumstances.
Building a portfolio of wealth helps you achieve financial freedom, giving you peace of mind about finances and calmness in your life. If you would like to know more, contact Hitesh at hitesh@medisuccess.com.au or call 07 3161 9548.
