Gold and Silver Do Well In Times of Uncertainty
Financial markets have focused and obsessed on “global financial uncertainty” resulting in large part from the Brexit vote. Many uncertainties have flowed from the vote of the people of the United Kingdom to leave the European Union. How and when will it occur? Will it occur? Will other European member states wish to leave? What will be the impact of any such attempts or successes? While there are no readily apparent answers to these questions, policy makers and financial analysts have had time to ruminate and make plans.
Focus on the United States
At the moment the United States is not under major threat of losing a state to secession, but there are greater political uncertainties in the United States, than at any time since the late 1960’s early 1970’s. The two presumptive nominees of the Democratic and Republican parties are scorned and/or not trusted by major segments of their own parties and of the population. This dynamic has led to divisive politics that will have uncertain outcomes.
Whomever is elected President in November will face an angry electorate. Neither candidate seems to have unifying skills or personalities. An election of either Hillary Clinton or Donald Trump will lead to political and economic uncertainties.
A Hillary Clinton Presidency
Prior to Ms. Clinton’s email scandal, conventional wisdom would have argued that the election of Hillary Clinton would have provided continuity, stability and certainty. The FBI investigation of Ms. Clinton’s (mis) handling of classified information and recommendation that she not be prosecuted and the ceasing of any further investigation or action against Ms. Clinton by the Justice Department changed all that.
A prevailing point of view among Ms. Clinton’s detractors and some of her supporters is that her actions and statements regarding her handling of classified information make her appear unreliable and untrustworthy. The decision not to take any action against Ms. Clinton by the Justice Department as recommended by the FBI, make her appear above the law. A visit by Ms. Clinton’s husband, former President Bill Clinton, with Attorney General Loretta Lynch on the tarmac the Phoenix airport sealed an image of a corrupt cabal circling the wagons to protect their own.
Ms. Clinton’s enemies in Congress will probably pursue perjury charges and recommend further investigations into the Clinton Foundation. These actions will cast further doubt on the credibility of Ms. Clinton and her suitability to hold the highest office of the United States and to act as leader of the free world. If Ms. Clinton were to win the Presidency, she would take the oath of office with her credibility severely damaged and perhaps still facing Congressional investigations that would undermine her ability to set an agenda and to govern.
A Donald Trump Presidency
The election of Donald Trump in November provides perhaps, even more uncertainty than the election of Ms. Clinton. Like Ms. Clinton, Mr. Trump faces large and vocal opposition. From Ms. Clinton’s prior government service as First Lady, Senator and Secretary of State, there is some level of comfort that there is sufficient information to form a judgement on how she might act as President (as uncomforting as that may be). Donald Trump, in contrast, has never held political office and it is uncertain how Mr. Trump might conduct himself in the Oval Office.
Boardroom politics with which Mr. Trump has great familiarity, are dramatically different than Congressional and International politics with which Mr. Trump has no experience. How Mr. Trump would deal with both is unknown. The reaction to a Trump election is also more likely to cause civil unrest than the election of Ms. Clinton due to what is perceived as Mr. Trump’s predilection to “speak his mind” and in doing so often cause him to make incendiary statements.
While the 2016 campaign has created the uncertainty as to whom will be elected President, the election of either Ms. Clinton or Mr. Trump will not remove uncertainty, and will merely act to create a new set of uncertainties that will have to be factored into the existing “global economic uncertainties”.
This article by BGASC is not, and should not be regarded as, investment advice or as a recommendation regarding any particular course of action.