Investment managers brace for uncertain investment environment following Trump win

T. Rowe Price Group managers are bracing for uncertain investment environment following Trump's win

Financial analysts and wealth managers warned of an uncertain investment environment after Donald J. Trump's upset win of the presidential election.

After an initial swoon as Trump's surprise win grew evident Tuesday night, markets settled down after the New York businessman's acceptance speech, in which he acknowledged Democratic nominee Hillary Clinton's service to the country and called for unity — a departure from the more incendiary comments that characterized his campaign.

On Wednesday, the nation's stock markets opened unsettled but bounced up after Clinton's concession speech. The Dow Jones industrial average ultimately climbed 256.95 points, or 1.4 percent, to 18,589.69. It was briefly up 317 points.

The Standard & Poor's 500 index gained 1.1 percent to 2,163.26 The Nasdaq Composite Index also rose 1.1 percent to 5,251.07.

Still, local and national financial experts said the U.S. and global economies could be in store for a rocky ride, citing Trump's lack of governing experience and uncertainty about his future policies.

"Markets could go down materially because Trump is such a wild card," Jeff Rottinghaus, manager of the U.S. Large-Cap Core Equity Strategy for T. Rowe Price Group, said in a statement.

"Buckle your seatbelt," said Greg McBride, chief financial analyst for Bankrate.com. "Over the next several weeks and coming months, uncertainty will reign. There will be a lot of volatility, a lot of ups and downs, simply because we don't know. We don't know what's going to change, when it's going to change or how much it's going to change."

Trump's campaign promises — such as granting tax cuts without offsets from greater revenue, renegotiating the North American Free Trade Agreement and possibly withdrawing from the World Trade Organization — would bring "abrupt, significant changes" in U.S. fiscal, trade, immigration and tax policies, and could have a strong impact on the economy both here and internationally, T. Rowe Price investment managers said in a Thursday morning memo.

Experts with the Baltimore-based money management firm also expressed concern that his policies could drive up the national deficit and long-term debt.

Clinton's decades of public service and role in her husband's administration gave investors a good idea of how she would govern and what her policies would have looked like, McBride said.

But investors know much less about Trump, who has no governing experience, he and others said. This, plus vague details about Trump's policies, add to the uncertainty that could rattle the markets in the months ahead.

At the same time, financial experts advised against knee-jerk investment reactions.

T. Rowe CEO William Stromberg encouraged people to consider the context of this historic election — a bull market in which the economy has been steadily growing since about 2009.

"It's always important to keep both feet on the ground and remember there are cycles to this business," Stromberg said in an interview.

As businesses and investors recalibrate, they will be watching whom Trump appoints to his Cabinet and key leadership positions. With little information about Trump's own governing style, the experience of the people appointed to key positions could offer insight to how the Trump administration will approach tax reform, immigration and trade, said Eric D. Brotman, president and managing principal of Brotman Financial Group Inc. in Timonium.

"If he doesn't try to be the brightest bulb all the time, he could attract some talent and take us in a new direction," Brotman said.

Single-party control over the House, Senate, White House and, presumably, the Supreme Court, will give Republicans power to get more done, such as tax reform, which could be good for businesses, said Karyl B. Leggio, a professor of finance at Loyola University Maryland.

The market's rebound Tuesday night following Trump's acceptance speech and positive performance Wednesday is a sign that investors and businesses are coming to terms with a different administration than they anticipated, she said.

"Your first conclusion from today is the market doesn't think a Trump presidency will be a disaster," Leggio said.

sarah.gantz@baltsun.com

twitter.com/sarahgantz

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