The key question on many investors’ minds after Donald Trump was named 45th President of the US is what should they sell, hold or buy.
Dan Kemp, chief investment officer for Morningstar Investment Management Europe, said there were lots of mis-pricing opportunities created by the shock victory for Republican Mr Trump over his Democrat rival Hillary Clinton.
Mr Kemp said the knee-jerk price changes within key equity markets are providing an opportunity to increase exposure to high conviction assets that have become cheaper.
The way markets reacted following Mr Trump’s triumph also offered opportunity to reduce exposure to some ‘defensive’ assets that are likely to become more overvalued, Mr Kemp added.
He said: “Turbulent markets can create great opportunities for value investors to purchase assets that will add meaningfully to returns in the future.
“Buying in the dips can be a profitable exercise providing the investor buys the right assets and those with a margin of safety.
“We believe a framework to identify these assets is essential, as it may otherwise tempt investors to buy assets that do not have fundamental appeal.
“In this respect, we continue to believe US equities are expensive relative to fair value and are therefore unlikely to advocate buying into any initial weakness in this market.”
Joshua Maxey, managing director at researchers Third Bridge, said the demand for research into pharmaceuticals, defence and the media sector spiked this morning (9 November), as Mrs Clinton admitted defeat and hedge funds and other institutional investors took stock of the implications of a Trump victory.
Mr Maxey said: “A common theme around US healthcare suggests that many investors are particularly concerned about the impact of the result on pricing in the pharmaceuticals sector, such as for cancer drugs, and the effect on possible merger and acquisition opportunities within the sector.
“The research pipeline saw less of a bulge in the run up to the US election, compared with enquiries prior to the Brexit vote earlier this year, which suggests investors were potentially more confident in a Hillary majority than they were approaching the last major geopolitical shock to hit markets.
“Investors will have their work cut out to stress test their portfolios, and get to grips with the new landscape, and we expect the growing demand for sector specific research to continue as we hear more from Trump about his policy intentions.”
Derry Pickford, co-head of asset allocation at Ashburton Investments, said he used the sell-off to increase risk, in expectation of a bounce as markets digest the initial shock of Trump’s win and recognise that Congress are likely to block more extreme policies.
While making predictions when uncertainty is so elevated is a risky business, Mr Pickford said he would be surprised if there were not more surprises to come from US politics.