Investors should think before reacting to the US election result

The US election result isn’t just about America – but UK businesses and investors shouldn’t respond in haste, says Jane Booth

The dust is still settling after a major few weeks of political events, from the publication of the UK’s Autumn Budget to the election of the 47^th President of the United States.

It’s been an interesting period for us in terms of the conversations we’ve been having with clients about what political scenarios could mean for themselves, their businesses, and their own personal finances. And it’s been particularly pertinent to hear the perspectives of North West business leaders in the recent weeks leading up to the US election. Speaking to plugged-in individuals who see it as their business – and investment – prerogative to remain up to date on how global events are unfolding, the general sentiment has been that the result likely wouldn’t make a significant difference to them. In fact, we’ve heard that some individuals feel that a shift in US leadership – and the potential policy changes that come with it – would have little to no impact on their business and investment portfolio here in the UK.

However, we know from experience that this simply is not true, as the saying goes: when America sneezes, the world catches a cold. It would be remiss to believe that such a seismic shift in US leadership wouldn’t impact us here in the UK. As a business with a vested interest in supporting entrepreneurs to grow their businesses and reap the rewards, we’re keen to bust some of the myths around what it could mean for them in practical terms.

It’s fair to say that the UK is a major global economic player; here in the North West, for example, the region is recognised for its innovation and home-grown entrepreneurial talent. The scale of opportunity and potential here is vast – and with the right support for business growth, the economic reward could be significant. But the state of international trade and the global economy can impact businesses everywhere – for better or for worse.

Following the US election result, UBS Global Wealth Management’s Chief Investment Office is advising that potential trade tariff changes – such as increases to universal tariffs and tariffs on goods from China specifically – are the most potentially consequential policy from a European economic perspective. However, it is likely to take some time for any new tariffs to be introduced so their impacts may not be seen immediately.

Moreover, UBS continues to view consumer staples, IT, and utilities as Attractive in Europe – though IT and utilities could face additional headwinds. Given that northern cities like Manchester and Leeds are major tech hubs, owners will need to brace themselves for what could be around the corner, seeking strategic advice before undertaking any significant business moves.

Our overarching advice in any period of turbulence is that investors should consider the long-term implications of the scenario – in this case, the election result – and make forward-looking investment decisions – rather than acting in haste. At UBS, our regional teams work closely with clients across the North but have the benefit of drawing on centralised, global resources and insights to ensure we are providing the most sound, up-to-date advice from a local through to a global perspective. This means that we can look at the bigger picture, understanding how macro circumstances may impact business and finances on a localised level and supporting them through the scenario.

Beware confirmation bias

One thing that we tend to see when major geopolitical shifts like this happen is that investors are concerned and quick to consider significant portfolio shifts. Confirmation bias, whereby investors seek affirmation that their intentions are justified, can be particularly rife around elections. As the media landscape becomes populated with ‘what if’s and ‘could happen’s, investors can be rendered vulnerable to prejudiced information and fall into the trap of political biases.

Of course, it’s completely understandable that investors may be hasty to mitigate potential risks, but responding to volatile situations in haste makes for a bad investment strategy. The danger is that this can be counterproductive to long-term portfolios; on the flip side, diversified portfolios can be a good way to improve resilience amid today’s challenges. And for business owners, looking long-term and being clear on future plans to buy and sell equips them with a better chance of taking advantage of volatility.

Ultimately, the weeks to come are sure to be populated with further emerging news and advice about ‘what happens next’. But by thinking long-term and seeking expert advice, businesses in the UK can navigate the implications in the most strategic, informed way.

Jane Booth is head of the Manchester office at UBS Global Wealth Management