My account

Reactions remain mixed in the wake of the U.S. mid-term elections. The Democrats’ victory in the House of Representatives will enable it to once again play its role as a counterweight.

However, combined with the Republicans’ victory in the Senate, this Democratic majority portends a possible battle between the two chambers, which could have a negative impact on the country’s economic growth.

The November 6 election underscored the deep division that exists between American citizens as well as between the political parties, each clinging to its positions, with little chance of agreement. This situation bodes ill for the 2020 elections.

Market reactions

The most positive effect was to remove the element of uncertainty that had been hanging over the markets for some time and which had contributed to their volatility in October. The Democrats want to get certain major projects back on the agenda, including  infrastructure renewal, and to allocate the funds required for this. Such a project would have a beneficial impact on the U.S. economy, in terms of both growth and job creation.

In addition, at his November 6 press conference, President Trump showed some willingness to work with the Democrats, which was viewed positively by the markets. The U.S. Federal Reserve (Fed) is sticking to its positions and is still projecting rate hikes in 2019.

Management of the portfolios

  • In the current environment, equities are still favoured. Our Private Management portfolios are overweight U.S. and emerging market equities, which continue to deliver attractive returns.
  • As for bonds, yield spreads have narrowed, as brokers have sold their inventories. Yields on 10-year U.S. Treasuries have fallen slightly because of better budgetary discipline.
  • Note that value stocks, which had come back into favour on the markets, have given way to growth stocks. In the current environment, we are now including both types of stocks in our portfolios and are not favouring one over the other.
  • As far as our balanced funds are concerned, no change is planned for the moment. There would be no benefit in rebalancing and we remain within our targets.

As always, we are monitoring the latest developments and will keep you informed of any situation that could affect your portfolio.

The Financial’s Investment Team

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