5 ways for investors buying ASX shares to stay focused during economic uncertainty

ASX shares investors and market analysts are still digesting the news of Donald Trump’s election and the economic uncertainty that comes with a new US President.

Arguably, the economic issue at the forefront of Australian investors’ minds is how Trump’s proposed import tariffs may impact our economy, both directly and indirectly.

The biggest concern among analysts appears to be how the new President’s proposed 60% tariff on Chinese goods may further weaken China’s economy, thereby reducing demand for our commodities.

You can read an overview of Trump’s key economic policies here.

Plenty of people are saying, ‘When you change the Presidency, you change the world’. So, should ASX shares investors do anything with their portfolios to prepare for Trump’s second reign?

What Trump means for markets

AMP Ltd (ASX: AMP) Head of Investment Strategy and Economics, Dr Shane Oliver, says the confusion over what Trump’s election will mean for global share markets “has gone into hyperdrive lately”.

He remarks that all the commentary is based on proposed policies that are yet to actually play out. And all this noise could simply get worse.

Dr Oliver comments:

[Trump] is likely to be less constrained this time around with less old-style Republican “adults in the room” and an inability to run for a third term. And we are likely to see a return to Trump’s erratic style of policy making with a renewed focus on his social media posts, with all the noise that comes with that.

Here’s a key question for ASX shares investors.

If you have a 20, 30, or 40-year timeframe for your investments, will a second Trump presidency lasting just four years really affect your long-term returns?

This is one of Dr Oliver’s points as he lays out five ways for ASX shares investors to turn down the noise, stay focused, and survive the next Trump era in a new blog.

5 ways for ASX shares investors to ‘turn down the noise’

1. Put worries in context

Dr Oliver offers a long list of worries for markets over time, including two world wars, the Great Depression, stagflation and the oil crisis of the 1970s, the tech wreck, 9/11, the GFC and COVID-19.

He says:

… despite this, investment returns have actually been good as shares climb a long-term wall of worry.

Since 1900 Australian shares have returned 11.7% pa and US shares 10% pa (including capital growth and dividends).

And in relation to Trump we survived his first time around and he still wants shares to go up, not down!

2. Recognise that shares return more than cash in the long term

Dr Oliver said stocks can be highly volatile in the short term but deliver strong returns over the long term.

And invariably the short-term volatility is driven by investors projecting recent events around profits, dividends, rents and interest rates into the future, and so, causing shares to diverge from long-term value.

So, share market volatility driven by worries, bad news, and bouts of euphoria is normal. It’s the price investors pay for higher longer-term returns.

3. Find a process to help filter noise

Dr Oliver says finding a filter will help ensure that short-term news won’t distort our investment decisions.

He suggests choosing one to three good investment subscription services and relying on them for news and perspective.

Alternatively, create a long-term strategy with a financial planner and stick to it.

4. Make a conscious effort not to check your ASX shares so much

Dr Oliver says there’s no point looking at your ASX shares or US shares investments every day.

His reasoning is as follows:

The daily movements in US or Australian shares are down almost as much as they are up.

By contrast, if you only look at how the share market has gone each month and allow for dividends, historical experience tells us you will get bad news less than 35% of the time.

The less frequently you look the less you will be disappointed, and so, the lower the chance that a bout of “loss aversion” will be triggered which leads you to sell at the wrong time.

5. Look for opportunities to buy ASX shares

Keeping an eye out for buy-the-dip opportunities is a positive way of viewing market volatility.

Periods of share market turbulence after bad news throw up opportunities for investors as such periods push shares into cheap territory from which strong gains have historically been seen.

ASX shares in the green on Thursday

The S&P/ASX All Ordinaries Index (ASX: XAO) is up 0.18% to 8,466.2 points at the time of writing.