The recent 2024 U.S. election has introduced uncertainty into financial markets, with investors navigating a range of potential scenarios under the new administration. While some policies suggest pragmatism, others hint at higher inflation and economic disruption. How should advisers approach this evolving landscape?

In our latest "3 in 10" session, Daniel Nagle, our new Business Development Manager for NSW, joined Portfolio Manager Jonathan Ramsay to share insights on market volatility and how portfolios can be positioned to navigate these challenges.

 How can advisers guide clients through post-election market volatility?

The U.S. election has added new layers of complexity to financial markets, as investors weigh the implications of policy changes. While some decisions may be pragmatic, there are growing concerns about potential inflationary pressures and market disruptions.

Advisers can help clients by encouraging a balanced approach during this volatile period. In the near term, staying close to benchmarks can help mitigate the risks associated with sudden sentiment shifts. Liquidity-driven rallies are still possible as we move into 2025, so taking overly defensive or aggressive positions could prove risky.

What investment strategies could deliver strong returns in today's global economy? 

The medium-term challenge lies in navigating a market dominated by expensive growth and momentum-driven leaders, such as the "Magnificent 7" megacap tech stocks, versus undervalued opportunities in global small caps and emerging markets.

While megacap tech continues to deliver robust earnings growth, their high valuations expose investors to greater volatility risks. On the other hand, small caps and emerging markets offer attractive yields (4-5%) and mid-to-high single-digit earnings growth potential. These assets provide a compelling case for high single-digit or even low double-digit returns while mitigating the drawdown risks associated with pricier growth stocks. Advisers should consider gradually shifting client portfolios toward these undervalued areas to balance growth potential with reduced risk.

How can advisers help clients stay focused on their long-term financial goals despite high interest rates?

For clients in the accumulation phase, focusing on capturing long-term returns is critical. This means avoiding concentrated positions in high-valuation momentum trades that could result in permanent capital impairments during significant pullbacks. Similarly, retirees need to manage sequencing risk by prioritising assets with lower volatility and sustainable yields.

Advisers can guide clients toward a pragmatic strategy that balances near-term benchmarks with a gradual shift to undervalued assets offering solid yields and reasonable valuations. This disciplined approach safeguards against downside risks while positioning portfolios for sustainable, long-term growth.