The current volatility in financial markets, which has been fueled by the outcome of the US presidential polls, will last for only a short term, so both expatriates and investors have no reason to make drastic decisions, financial experts said.
“[We] certainly would not advocate investors making drastic [decisions]," a wealth management firm said.
The attention of the investment and expatriate communities has been firmly fixated on the US election results. Donald Trump’s victory has shocked the markets and sent investors running for cover.
Commodity, particularly gold, prices rallied on heavy buying, while the US dollar fell. As of the latest count, most Asian markets tumbled in the range of 1 to 4 per cent.
Over the last few days, there have been reports that UAE expats are turning to other foreign currencies, as the US dollar was expected to fall if Trump gets the presidency.
According to financial experts, the current volatility in currencies and in financial markets is only a knee-jerk reaction and will not last very long. Rather than rushing to buy new currencies, expats would do better if they wait out a little bit. What holds far greater significance is the long-term policy actions of the next US president, as well as the upcoming interest rate decision by the US Federal Reserve - which can have more impact on the US dollar.
“Things will come into perspective over the long term, based on policy actions taken by the incumbent,” said M.R. Raghu, senior vice president for research at Kuwait Financial Centre (Markaz).
“In the short term, stock markets are a voting machine while in the long term, they are weighing machine. Hence, there will be high volatility in the short term. Till volatility subsides, it is better to be waiting on the sidelines and then make changes to portfolios,” Raghu told Gulf News.
From a business point of view, however, Raghu said Trump’s victory could have an impact in the Middle East. “Given Trump’s preference to certain religions, future business deals with the US might have an impact on account of possible changes in foreign policy towards the Middle East,” he said.
As for the remittance sector, Sudhesh Giriyan, COO of Xpress Money, said a new trend will develop most probably after the new US president makes significant policy changes. “We have not seen any major surge in remittances today. If there are any policy changes in the near future owing to the new president, maybe we could see a new trend, but it won’t happen overnight,” Giriyan told Gulf News.
According to Hermes Investment Management, what the public should look out for is the upcoming meeting by the Federal Reserve.
“The market is forecasting a 70 per cent chance of a Fed hike.” “[We] certainly would not advocate investors making drastic changes to a portfolio. [While there is an initial knee-jerk reaction from markets], a result either way is unlikely to have a dramatic impact on the US economy over the longer term.”
