There are few political figures who polarise people quite like Donald Trump. Indeed, you could suggest that was part of the very reason he won. As US President, so far we know he's not prepared to give up Twitter, is prepared to harangue even his closest allies, and he's not planning to tone down his combative style.
You and I can agree or disagree on how well he's performing the role of leader of the free world, but one thing we can't do, as investors, is avoid him. I mean, you could sell everything and retreat to a cave with a presidential term's worth of baked beans and ammunition, but even that is making a choice.
![Investors can't ignore US President Donald Trump.](/web/20170208021602im_/http://www.theage.com.au/content/dam/images/g/u/6/7/z/4/image.related.articleLeadwide.620x349.gu69sh.png/1486437512807.jpg)
So let's confront this head on: we have a Trump-led economy that's the world's largest and a volatile and unpredictable global political environment. What's an investor to do?
As in all things investing, it pays to nod towards the greatest exponent of the craft, Warren Buffett. Since the US election, Buffett says he's bought shares worth some $US12 billion. That's $16 billion in our money. And for reference, he's a long-time Democrat who campaigned for Hillary Clinton.
So Buffett is bullish on Donald Trump? I wouldn't bet on it. It's far more likely that he's agnostic, at least from an investment perspective. His long-held view is that regardless of who is in the White House – and he's been investing since FDR was in power, for a total of 14 presidents – we should keep investing. Plenty of people have told Buffett he was wrong over that time. He's made mistakes, but he has 60 billion reasons – each a US dollar bill – to suggest he's been right.
So then, invest in what? It's a vexed question. Barack Obama's ascension to the top job had people betting on clean energy, based on his renewable energy policies. That strategy was a bust. In 2012, people were betting on Obama's policies giving home builders a boost. Two years later, those companies had gone nowhere. Unfortunately, it's a trend that has continued to disappoint: trying to guess what sectors and companies would do well – or badly – has been a waste of time. Oh, sure it sounds smart, but it's also wrong. Or irrelevant, as best.
Of course, I write this in the shadow of a 10 per cent jump in the sharemarket since Trump was elected. Proving me wrong. Except that, up until the day after he was elected, the smart money was saying he'd be terrible for stocks. And the ASX fell 4 per cent in the immediate aftermath of his election. Is Trump the exception that proves the rule? Perhaps. But three months since his election – and two weeks since his inauguration – isn't exactly a reliable dataset on which to base an answer.
I'd be very sceptical of the sectors that have been the "obvious" choices. These are the construction companies, the banks and commodity businesses, expected to gain from a less-regulated, newly confident America. In part, because history suggests there's no correlation, but even more now, because those stocks have already been on a big run. If the market is wrong, then we can expect those companies to fall back. That means extra risk for an uncertain return.
Foolish takeaway
We all want an "edge". We want to feel smart. Not having a view seems somehow negligent. So here's mine: I have no idea what Donald Trump will mean for shares, other than a decent chance his leadership style means more volatility than we're used to. But I'll stick with Buffett and buy great companies at good prices, when I get the chance. Then just buckle in for what could be a bumpy ride.
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Scott Phillips is the Motley Fool's director of research. You can follow Scott on Twitter @TMFScottP. The Motley Fool's purpose is to educate, amuse and enrich investors.