Big changes are underway in the United States, as the country gears up to elect a new president this week! I am writing about this since a good number of my friends are still pissed about President Rodrigo Duterte’s pivot away from the US (for various reasons), but of course this is just one (business & investments) perspective.
US investment in the Philippines
In 1982, the Philippines was the fourth largest site for American capital in Asia and Pacific ranking 31st at the time, valued at $1.3 Billion; while in 2015, US investments totaled only $4.7 billion compared to our neighbors (who are not “long time” allies compared to PH) with at least more than ours.
What’s up with that? And yet, some of us are panicking about US or BPO companies leaving but in reality, we are somewhat the least preferred destination of investment money.
One can blame the government (Politicians are not necessarily salespersons), or policy on foreign investment restrictions but those are just lame excuses for entrepreneurs or businessmen always finds some round-about way if they really wanted to stay invested in the Philippines.
Do you know how much effort Big multinationals put into cross-border tax planning? They can definitely deal with a country’s policies.
Oh sure, the U.S. is the world’s largest economy, with a gross domestic product (GDP) equal to approximately US$18 trillion annually, or about 16% of the global GDP. But the U.S. debt to China is $1.185 trillion, as of August 2016. That's 30% of the $3.948 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $19 trillion debt is owned by either the American people or by the U.S. government itself..
They also spend ridiculous amounts on their military to the point of neglecting some of their infrastructure, education to name a few. These data is just something to ponder on.
Change is coming over there
Potential changes in Federal Reserve interest rate policy may have the largest potential impact on the global economy and markets under a new administration. The president does not have direct decision-making power over Fed policy. However, the executive branch’s decisions regarding the federal government budget and other matters that may influence interest rates will likely alter the conditions under which global markets operate.
Like China, there are many pieces to the US puzzle, it’s not all “United” in the states.
Effects on Phl
Only THE FED can have a direct effect on us as far as the money markets are concerned. For other industries, it is still uncertain but for business people, it’s business as usual – whatever happens, they always adapt.
As for the candidates, stocks and bond markets will react if Donald Trump is elected President and probably destroy America. If Hillary Clinton wins, her tax hikes will piss-off a lot of people. And oh yeah, her foreign policy will probably end up destroying the world.
But as investors, we should be prepared for the possibility of a short or longer-term shift in the current market sentiments. The key is to understand one’s emotional reaction to the situation—is what matters the most if you want to get the most gains for your investment portfolio (or your business).
The writer is an RFP® - registered financial planner of RFP PH, Licensed Real Estate Broker and Director of CERTA, Inc., a family estate planning and investment advisory firm. To know more, please visit www.certa.ph
Originally Published in Philstar - The Freeman Newspaper last November 8, 2016.