This is certainly an interesting time to be a value investor. I’m saying that because as an investor I’m obsessed by looking out at the horizon and identifying the oncoming downside investment risks. At this period in time it’s particularly difficult to quantify those risks to portfolio performance.


Aside From the Obvious Sources of Uncertainty

The most significant downside investment risks are known. Risks such as: bond yields, the EU economy, Brexit, oil prices, inflation, and the Chinese economy. Once those risks are mitigated for there is another. Another risk for which the best minds in the investment world cannot seem to apply the usual calculus. The epicentre of the risk and an increasingly large cone of uncertainty is January 20th, the inauguration of President Trump.


Most probably there will be a profound ideological pivot in government and how government executes its policies. This pivot will affect corporate earnings and be a source of market volatility.


Case in point. Companies such as Ford have already started delaying or cancelling capital expenditures. In Ford’s case, the company scrapped a $1.6 billion car plant in Mexico. The cancellation was coincident with threats from the incoming President of a border tax for imported cars.


That follows one of many instances where the President Elect has moved markets. Most notably, in December Lockheed Martin’s stock dropped almost 3% in premarket on a tweet regarding the costs of the F-35 stealth fighter program.


Way Forward Readings

The repercussions from the new administration’s policy and regulatory changes and how these changes interact in the financial markets are unknown.


So investment-wise, I’m in a bit of a holding pattern; awaiting policy initiatives that will decrease the uncertainty/increase clarity. Therefore there is no significant change to my post- summer assessment and action plan.


While I wait, as usual, I’m doing lots of reading that informs how I see the investing environment. The readings are from a variety of respected sources. Here are a few of them:


1. Trumpian Uncertainty

Joseph Stiglitz, Project Syndicate


2. Investment Outlook

Bill Gross, Janis Capital Group, January 2017


3. Global Investment Outlook 2017



4. A Shifting U.S. Policy Mix: Global Rewards and Risks

IMF, Dec 2017


5. Countries in the IMF Financial Spotlight in 2017

IMF, Jan 2017


6. Tired bull market will ‘plague’ Donald Trump

Financial Post, Dec 2016


7. Three things to tackle now before the economy’s next slump

David Wessel, Brookings Institute, Jan 2017


8. Capital Markets Outlook 2017: All Eyes on the USA

Deutsche Bank


9. 2017 Investment Outlook

Goldman Sachs


You can write in with your comments and like/share this post: Facebook.   Google+.   LinkedIn.   Twitter.


It Pays to Become a MyAssetClass Contributor

MyAssetClass pays you as much as $500 to contribute articles on your best and current experiences with value investing. The forum focuses on the broad principles of value investing and publishes compelling and engaging content which will affect your decisions.


While investment strategies are personal, and this investor discussion forum doesn’t give investment or financial advice, there are some common tenets of value investing that can be better understood by structured and focused discussions with other like-minded investors.


Join the discussion.