More things can happen than will happen
Investing is an exercise in assessing the likelihood and impact of different futures, yet political campaigns are an exercise in championing a very specific future. So let’s pause to consider one future that is capturing the attention of many investors: the adoption of more protectionist trade policies in the United States.
First consider the probability that a particular candidate is elected. Then consider the probability that the candidate follows through on their promises. Then consider the probability that a candidate is successful in effecting change. Quantifying these events is virtually impossible, but since the probability of three events occurring in conjunction is less than the probability of either one occurring alone, a future with the United States having more trade barriers as touted in this Presidential campaign seems unlikely.
But even if the United States charges higher tariffs on imported goods, the competitive advantage afforded to US companies may be muted because many have shifted manufacturing to lower cost countries.
So taken together, this very specific future has a low chance of occurring, and may actually have a lower impact than what some candidates would have you believe.
A rational perspective should serve investors well during heightened emotional times.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
INVEST WITH MONTGOMERY
