Chuck Self with Financial Advisor Magazine on ETFs and The Trump Effect
Posted on: 01/03/2017
ETF Strategists Assess The Trump Effect
JANUARY 3, 2017
Like the election itself, the potential reaction of the markets to a Trump presidency defies prediction. With uncertainty in the air, ETF strategists continue to assure clients that they are crafting portfolio strategy based on the market and economic influences in place before the surprising election results. At the same time, some are making tweaks around portfolio edges to capitalize on changes that the new president’s administration might bring, or to navigate areas that may be susceptible to extreme volatility or a downturn.
Chuck Self comments in the article:
For some advisors, the main goal for now is maintaining a steady eddy approach and assuaging client angst that could crop up. “I’m advising our clients to stay the course,” says Chuck Self, chief investment officer at iSectors, a firm that designs asset allocation models for financial advisors. “Even if the GOP comes together and decides on major changes, it’s going to be at least late 2017 or 2018 before anything has an impact on corporate earnings.”
Given slow economic growth, and the fact that Federal Reserve chair Janet Yellen’s term is not set to expire until 2018, Self believes many investors are overestimating the potential for substantive rate increases in 2017. In the near term, he believes, sluggish corporate earnings are more of a concern. “There’s been a decent upside in stocks this year without an accompanying earnings increase to back it up. Unless earnings start accelerating, we could see a market correction of 10% or more in 2017.”
He believes one sector where the Trump effect could eventually yield positive results is technology. Ever since the recession, many companies have been busy shoring up their balance sheets and spending less than they have in the past on technology upgrades. If Trump lowers corporate taxes, as he has proposed, companies would likely ramp up spending in that area. Self likes the iShares North American Tech ETF (IGM) as a core technology sector play. Unlike many ETFs, which are heavily weighted in Apple and Microsoft, this one has an allocation of less than 10% to each of these companies, making it more diversified. It also has holdings throughout North America, rather than just in the U.S.